Question Details

Explain why the cost of capital for a U.S.-based MNC 



1. Costs of Capital Across Countries. Explain why the cost of capital for a U.S.-based MNC with a
large subsidiary in Brazil is higher than for a U.S.-based MNC in the same industry with a large
subsidiary in Japan. Assume that the subsidiary operations for each MNC are financed with local
debt in the host country.
2. WACC. An MNC has total assets of $100 million and debt of $20 million. The firm- before-tax
cost of debt is 12 percent, and its cost of financing with equity is 15 percent. The MNC has a
corporate tax rate of 40 percent. What is this firm- weighted average cost of capital?



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