There are conflicting studies which conclude that the WACC for a global firm is higher than the WACC for a purely domestic firm on the one hand and lower on the other. Regarding this controversy, which of the following statements is incorrect?
A) It is hypothesized that the WACC for a global firm is higher than the WACC for a domestic company because of the existence of political and currency risk, higher agency costs from operating in a foreign market, and asymmetric information about how to operate successfully in the foreign market.
B) It is hypothesized that because returns in foreign capital markets are not highly correlated with returns from the U.S. market, great diversification potential exists when investors hold a globally-diversified portfolio, and this reduces the WACC for an MNE below that which would exist for a purely domestic company.
C) It is hypothesized that because capital markets in emerging markets are neither deep nor liquid, the WACC starts to increase at lower levels of capital raised for an MNE than for a domestic company raising capital in the deep and liquid U.S. market.
D) It is hypothesized that global companies face an investment opportunity schedule (IOS) above and to the right of the IOS for a purely domestic firm, so the intersection with the MCC will occur at a rate that is greater than for a domestic company even if the MCC for the global company is below that of the domestic firm for the first dollar of new capital raised.

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The Answer of There are conflicting studies which conclude that the WACC for a global firm is higher than the WACC for a purely domestic firm on the one hand and lower on the other. Regarding this controversy, which of the following statements is incorrect?
A) It is hypothesized that the WACC for a global firm is higher than the WACC for a domestic company because of the existence of political and currency risk, higher agency costs from operating in a foreign market, and asymmetric information about how to operate successfully in the foreign market.
B) It is hypothesized that because returns in foreign capital markets are not highly correlated with returns from the U.S. market, great diversification potential exists when investors hold a globally-diversified portfolio, and this reduces the WACC for an MNE below that which would exist for a purely domestic company.
C) It is hypothesized that because capital markets in emerging markets are neither deep nor liquid, the WACC starts to increase at lower levels of capital raised for an MNE than for a domestic company raising capital in the deep and liquid U.S. market.
D) It is hypothesized that global companies face an investment opportunity schedule (IOS) above and to the right of the IOS for a purely domestic firm, so the intersection with the MCC will occur at a rate that is greater than for a domestic company even if the MCC for the global company is below that of the domestic firm for the first dollar of new capital raised.

There Are Conflicting Studies Which Conclude That the WACC for a Global