According to your text, which of the following is not a factor that increases an MNC's cost of capital?
A) higher exposure to exchange rate risk
B) higher exposure to country risk
C) an increase in the risk-free interest rate
D) an increase in the size of the MNC

Question

According to your text, which of the following is not a factor that increases an MNC's cost of capital?
A) ​higher exposure to exchange rate risk
B) ​higher exposure to country risk
C) ​an increase in the risk-free interest rate
D) ​an increase in the size of the MNC

Quizplus · Accepted Answer

An increase in the size of the MNC does not necessarily increase the cost of capital. In fact, larger MNCs may benefit from economies of scale and scope, which could lead to lower costs of capital. On the other hand, higher exposure to exchange rate risk, higher exposure to country risk, and an increase in the risk-free interest rate can all increase an MNC's cost of capital.

According to Your Text, Which of the Following Is Not