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Financial Structure and Cost of Capital in the Multinational Corporation

Published online by Cambridge University Press:  06 April 2009

Alan C. Shapiro
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Extract

As the multinational corporation (MNC) becomes the norm rather than the exception, the need to internationalize the tools of domestic financial analysis is apparent. A key question is: What cost-of-capital figure should be used in appraising the profitability of foreign investments? This paper seeks to provide a comprehensive approach to analyze the cost-of-capital question. It begins by extending the weighted cost-of-capital concept to the multinational firm. It then builds on previous research to address the following related topics: national or multinational financial structure norms; the role of parent company guarantees; the costing of various fund sources particularly when exchange risk is present; the impact of tax and regulatory factors; risk and diversification; and joint ventures.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 2 , June 1978 , pp. 211 - 226
Copyright
Copyright © School of Business Administration, University of Washington 1978

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