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Final Requirement

The document provides a recap of a presentation on Multinational Cost of Capital and Capital Structure, highlighting the importance of understanding cost of capital for MNCs and its implications on financial strategies. It also synthesizes the course on Advanced Corporate Finance, emphasizing the need for finance executives to analyze and respond to global financial trends, manage risks, and make informed strategic decisions. Key topics include capital structure, risk management, and the impact of international factors on financing decisions.

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2 views2 pages

Final Requirement

The document provides a recap of a presentation on Multinational Cost of Capital and Capital Structure, highlighting the importance of understanding cost of capital for MNCs and its implications on financial strategies. It also synthesizes the course on Advanced Corporate Finance, emphasizing the need for finance executives to analyze and respond to global financial trends, manage risks, and make informed strategic decisions. Key topics include capital structure, risk management, and the impact of international factors on financing decisions.

Uploaded by

patryzetipa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Good day everyone, as per the final requirement, I will be giving a recap of my assigned topic

and a synthesis of this course. In my previous presentation, I discussed about Multinational Cost
of Capital and Capital Structure. The topic consists of the background on cost of capital, cost of
capital for MNC and domestic firms, the use of international capital asset pricing model, the cost
of capital across countries, the MNC capital structure decision and the interaction between
subsidiary and parent financing decisions. Basically, this topic provides an insight on the
importance of the firm’s cost of capital such as providing a very basis for financial appraisal of
new capital expenditure proposals and can serve as capitalization rate which can be used to
determine capitalization of a new firm. We also have identified the peculiar features of an MNC
in terms of their scale of operations, their access to international capital markets, international
diversification and their exposure to country risk and exchange rate. Compared to the typical
capital asset pricing model, In the international CAPM, in addition to getting compensated for
the time value of money and the premium for deciding to take on market risk, investors are also
rewarded for direct and indirect exposure to foreign currency. The ICAPM allows investors to
account for the sensitivity to changes in foreign currency when investors hold an asset. An
understanding of why cost of capital varies across different countries provides an insight into the
reasons for competitive superiority of some MNCs in some countries. Knowledge of differences
in cost of capital in different countries may enable an MNC to formulate suitable strategy
regarding procurement of funds from those countries where they are available at lower cost. An
appreciation of cost of capital across the globe can throw light on the differences existing in the
pattern of capitalization of different MNCs. There are also some major characteristics that are
unique to each MNC that impacts the capital structure decisions, these are the character of
MNC’s cash flows, credit standing and profitability of MNC, MNCs guarantees on debt and
monitoring its subsidiaries. In procuring funds of both subsidiary and parent, they either can use
internally generated financing which consist of retained earnings and their free operated cash
flow or through external sources that involves debt or equity financing.

On the other hand, we have the synthesis of this course, Advanced Corporate Finance.
Recognizing and responding to rapidly changing financial trends in today's global economy
requires an objective framework for analyzing and evaluating opportunities and risks. To remain
competitive, finance executives need a solid foundation on topics such as capital structure, risk
management, financial technology, and mergers and acquisitions. In Advanced Corporate
Finance, we addressed issues like the capital structure question, either to raise funds through
debt, equity, or a combination of both. We also explored real-time concerns like managing cross-
border risks in today`s global economy, and valuing and assessing the financial and risk
implications of strategic decisions. Harnessing these insights gave us ideas for an organization to
have competitive advantage in a marketplace where companies are seeking new ways to
procure capital, engage in mergers and acquisitions, and increasingly make high-value cross-
border decisions.

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