Capital asset pricing theory would most likely suggest that the MNC's cost of capital is lower than that of domestic firms.

Question

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The Capital Asset Pricing theory suggests that the cost of capital of a firm is a function of its systematic risk (beta) and the expected return of the market. As MNCs operate in multiple markets, they are exposed to a greater level of diversification, which can reduce their systematic risk and hence lower their cost of capital. Therefore, the MNC's cost of capital is more likely to be lower than that of domestic firms.

Capital Asset Pricing Theory Would Most Likely Suggest That the MNC's