International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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- Which of the following statements best describes how a corporation determines its cost of capital? Group of answer choices The cost is derived from determining the cost of each component in a firm's capital structure. The cost is a function of the issuance of interest-bearing instruments. The cost is derived only from permanent investments by shareholders. The cost is a function of temporary (short-term) sources of financing.arrow_forwardFactors that affect the cost of capital equation Each of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm’s control? Check all that apply. The general level of stock prices The effect of the tax rate on the cost of debt in the weighted average cost of capital equation The firm’s capital structure The impact of a firm’s cost of capital on managerial decisions Consider the following case: Acme Manufacturing Corporation has two divisions, L and H. Division L is the company’s low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company’s high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division L is…arrow_forwardExplain carefully how taxation (both corporate and personal) influences a firm’s capital structure decision.arrow_forward
- How does a semi-strong market affect a company’s capital structure? Discuss the possible exposures and impact. Provide examples to justify your reasoning.arrow_forwardIn practice, external factors can impact a capital investment. Give a current external factor that may currently Impact or cause instability of capital spending either here or abroad.arrow_forwardTo create the global capital structure in a MNC, the business must ________. A. diversify to the oversea markets B. increasing its subsidiary's capital structure C. consolidate all of the foreign subsidiaries' capital structure D. expand competition to the other countriesarrow_forward
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What is WACC-Weighted average cost of capital; Author: Learn to invest;https://www.youtube.com/watch?v=0inqw9cCJnM;License: Standard YouTube License, CC-BY