Question Details

Explain the dilemma faced by Pullman 



1. Financing Decision. Veer Co. is a U.S.-based MNC that has most of its operations in Japan. Since
the Japanese companies with which it competes use more financial leverage, it has decided to
adjust its financial leverage to be in line with theirs. With this heavy emphasis on debt, Veer
should reap more tax advantages. It believes that the market- perception of its risk will remain
unchanged, since its financial leverage will still be no higher than that of its Japanese competitors.
Comment on this strategy.
2. Financing Tradeoffs. Pullman, Inc., a U.S. firm, has been highly profitable, but prefers not to pay
out higher dividends because its shareholders want the funds to be reinvested. It plans for large
growth in several less developed countries. Pullman would like to finance the growth with local
debt in the host countries of concern to reduce its exposure to country risk. Explain the dilemma faced by Pullman, and offer possible solutions.



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