Exam 14: The Global Cost and Availability of Capital

Empirical tests of market efficiency fail to show that most major national markets are reasonably efficient.

A national securities market is segmented if the required rate of return on securities in that market differs from comparable securities traded in other, unsegmented markets.

If a company fails to accurately predict it's cost of equity, then

Other things equal, an increase in the firm's tax rate will increase the WACC for a firm that has both debt and equity financing.

The capital asset pricing model (CAPM)is an approach

If a firm lies within a country with ________ or ________ domestic capital markets, it can achieve lower global cost and greater availability of capital with a properly designed and implemented strategy to participate in international capital markets.

The difference between the expected (or required)return for the market portfolio and the risk-free rate of return is referred to as ________.

In general the geometric mean will be ________ the arithmetic mean for a series of returns.

Empirical studies indicate that WACC for an MNE is higher than for their domestic competitors. Reasons cited for this increased cost include all of the following EXCEPT:

Which of the following is NOT a portfolio diversification technique used by portfolio managers?

The beginning share price for a security over a three-year period was $50. Subsequent year-end prices were $62, $58 and $64. The arithmetic average annual rate of return and the geometric average annual rate of return for this stock was

Other things equal, a firm that must obtain its long-term debt and equity in a highly illiquid domestic securities market will probably have a ________.

The authors refer to companies that have access to a ________ as MNEs, and firms without such access are identified as ________.

Which of the following is generally unnecessary in measuring the cost of debt?

The MNE can ________ its ________ by gaining access to markets that are more liquid and/or less segmented than its own.

Because of the international diversification of cash flows, the risk of bankruptcy for MNEs is significantly lower than that for purely domestic firms.

Which of the following is NOT a key variable in the equation for the capital asset pricing model?

Which of the following statements is NOT true regarding MNEs when compared to purely domestic firms?

Relatively high costs of capital are more likely to occur in ________.

What do theory and empirical evidence say about capital structure and the cost of capital for MNEs versus their domestic counterparts?