PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 32, Problem 10PS
Summary Introduction
To determine: The disadvantages of traditional Country U conglomerate.
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Companies go global for various reasons. Although becoming a multinational corporation provides prospects for high returns and diversification, it makes financial management more complicated for financial executives and managers. Based on your understanding of the factors that complicate financial management in multinational firms, complete the following statement:
Compared to domestic corporations, multinational corporations have (increased or reduced) risk from exchange rate fluctuations.
What is the impact of capital controls that restrict mobility of capital across nationalborders on domestic financial systems and the performance of the economy?
Discuss the factors that affect the WACC. Also discuss how these factors may differ somewhat from country to country. For example, if a company has a stronger balance sheet than other companies in its industry, investors will likely be willing to accept a lower interest rates on its bonds and this will lower the company’s overall cost of capital.
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- How political risk can affect the value of a multinational company?arrow_forwardHow do you think the international equity market might benefit Malaysian firms? Is there any potential downside to multinational companies (MNC) in Malaysia from more international equity market?arrow_forwardCompanies go global for various reasons. Although becoming a multinational corporation provides prospects for high returns and diversification, it makes financial management more complicated for financial executives and managers. Based on your understanding of the factors that complicate financial management in multinational firms, complete the following statement: Compared to domestic corporations, multinational corporations have risk from exchange rate fluctuations. Multinational versus domestic financial management According to the Bureau of Economic Analysis, the growth of capital expenses made by U.S. companies internationally was higher than the growth of investments made in domestic U.S. markets ("Summary Estimates for Multinational Companies: Employment, Sales, and Capital Expenditures for 2010," http://www.bea.gov/ newsreleases/international/mnc/2012/mnc2010.htm). While these companies might follow similar processes and concepts, their financial management tactics distinguish…arrow_forward
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- How is multinational financial management different from financial management as practicedby a firm that has no direct contacts with foreignfirms or customers? What special problems andchallenges do multinational firms face? Whatfactors cause companies to “go multinational”?arrow_forwardWhich of the following statements about working capital management in multinational corporations is correct? Multinational corporations can take advantage of the best interest rates available in the international financial markets by using global concentration banks. The primary reason foreign governments impose import or export quotas and tariffs is to ensure that multinational corporations are able to compete with domestic companies. O The political and legal environments in most foreign countries make it easier for multinational corporations than for domestic companies to collect defaulted credit accounts. O Many foreign governments provide multinational corporations that operate in their countries with subsidies to offset exchange rate changes that harm the foreign companies' profits. Generally, a multinational company faces a lower threat of government expropriation than do domestic companies.arrow_forward1. Do you know what International Financial Institutions is? What are its examples? What role does it play in the global arena? 2. Do you know what market integration is? How important is market integration in the global economy? 3. Do you know what is a corporation? What contributions does it play in the global economy?arrow_forward
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