Exam 17: Multinational Capital Structure and Cost of Capital

Which of the following is not a characteristic that favorably affects an MNC's cost of capital, compared to the cost of capital for a domestic firm?

The lower a project's beta, the ____ is the project's ____ risk.

One argument for why subsidiaries should be allowed to issue their own stock is that:​

An MNC with stable cash flows can probably handle more debt than an MNC with erratic cash flows.

An argument for an MNC to have a debt-intensive capital structure is that:

The capital asset pricing theory is based on the premise that:​

Which of the following factors is generally not expected to have a favorable impact on an MNC's cost of capital according to the text?

Because increased external financing by a foreign subsidiary reduces the external financing needed by the parent, such an action will not affect the MNC's overall cost of capital.

​Other things being equal, countries with relatively ____ populations and ____ inflation are more likely to have a low cost of capital.

In general, MNCs probably prefer to use ____ foreign debt when their foreign subsidiaries are subject to ____ local interest rates.

An MNC's cost of equity is unrelated to the local risk-free rate.

According to the CAPM, the required rate of return on a stock is a positive function of all of the following except:

In general, an MNC's size, its access to international capital markets, and its international diversification increase the MNC's cost of capital.

The cost of capital incurred by U.S.-based MNCs is primarily driven by global stock market volatility.

Zoro Corp. has a beta of 2.0. The risk-free rate of interest is 5 percent, and the return on the stock market overall is expected to be 13 percent. What is the required rate of return on Zoro stock?

Which of the following is not a reason provided in the text for why the cost of debt can vary across countries?

Which of the following is not an external source of debt for an MNC?

Which of the following is least likely to influence an MNC's capital structure?

When a host country announces a plan to block funds remitted to the subsidiary's parent, the subsidiary is likely to use a strategy of increasing local debt financing.

The capital asset pricing model (CAPM) suggests that the required return on a firm's stock is a positive function of the risk-free rate of interest and the market rate of return and a negative function of the stock's beta.