MNCs have lower long-term financing costs in international capital markets than in domestic markets because ________.
A) the cost of equity is less than the cost of debt in international capital markets
B) they have access to the international bond and equity markets
C) the cost of equity is more than the cost of debt in international capital markets
D) the international capital markets have less volatility and hence low risk

Question

Quizplus · Accepted Answer

MNCs have access to the international bond and equity markets, which offer a wider range of funding sources at lower costs than domestic markets. International capital markets are more competitive, liquid, and efficient, which reduces financing costs for MNCs. Additionally, international markets provide better opportunities for diversifying funding sources and managing risks. The cost of equity and debt in international capital markets may vary depending on market conditions, but the overall effect is that MNCs enjoy lower long-term financing costs in international markets.

MNCs Have Lower Long-Term Financing Costs in International Capital Markets