Question

​Which of the following factors is generally not expected to have a favorable impact on an...

​Which of the following factors is generally not expected to have a favorable impact on an MNC’s cost of capital according to our text?

Group of answer choices

none of the options listed

high exposure to exchange rate fluctuations

high degree of international diversification

​easy access to international capital markets

all of the options listed

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Answer #1

Following factors is generally not expected to have a favorable impact on an MNC’s cost of capital according to our text

  • high exposure to exchange rate fluctuations: TRUE: With high exposure to exchange rate fluctuation increases the cost of hedging for FX transactions. Those will increase cost of capital of the firm.

  • high degree of international diversification : FALSE: High degree of international diversification may have a favorable impact due to cost advantage/revenue diversification.

  • ​easy access to international capital markets : FALSE: Easy access to international capital markets will give opportunity for new investment. It may have a source for revenue streams.

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