Global integration has given many firms access to new and cheaper sources of funds beyond those available in their home markets. What are the dimensions of a strategy to capture this lower cost and greater availability of capital?
Answer to relevant QuestionsWhy did Novo believe that its cost of capital was too high compared to its competitors? Why did Novo’s relatively high cost of capital create a competitive disadvantage? The riddle is an attempt to explain under what conditions an MNE would have a higher or lower debt ratio and beta than its domestic counterpart. Explain and diagram these conditions. a. Define market segmentation. b. What are the six main causes of market segmentation? c. What are the main disadvantages for a firm to be located in a segmented market? Define “marginal weighted average cost of capital”. Give five reasons why a firm might cross-list and sell its shares on a very liquid stock exchange.
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