© 2016 Pearson Education, Inc.
CHAPTER 13
THE GLOBAL COST AND AVAILABILITY OF CAPITAL
1. Segmented Market. What are the most common challenges a firm resident in a segmented market
faces in regards to its access to capital?
2. Dimensions of Capital. Global integration has given many firms access to new and cheaper sources
of funds beyond those available in their home markets. What are the dimensions of a strategy to
capture this lower cost and greater availability of capital?
3. Cost of Capital Benefits. What are the benefits of achieving a lower cost and greater availability of
capital?
4. Equity Cost and Risk. What are the classifications used in defining risk in the estimation of a firm’s
cost of equity?
5. Equity Risk Premiums. What is an equity risk premium? For an equity risk premium to be truly
useful, what need it do?
6. Portfolio Investors. Both domestic and international portfolio managers are asset allocators. What is
their portfolio management objective?
7. International Portfolio Management. What is the main advantage that international portfolio
managers have compared to portfolio managers limited to domestic-only asset allocation?
8. International CAPM. What are the fundamental distinctions that the international CAPM tries to
capture which traditional domestic CAPM does not?
which the firm’s equity trades, and estimates of the firm’s beta (βj
(km
9. Dimensions of Asset Allocation. Portfolio asset allocation can be accomplished along many
dimensions depending on the investment objective of the portfolio manager. Identify the various
dimensions.
10. Market Liquidity. What is meant by the term market liquidity? What are the main disadvantages for
a firm to be located in an illiquid market?
70 Eiteman/Stonehill/Moffett | Multinational Business Finance, 14th Edition
11. Market Segmentation. What is market segmentation, and what are the six main causes of market
segmentation?
Capital market segmentation is a financial market imperfection caused mainly by government
12. Market Liquidity. What is the effect of market liquidity and segmentation on a firm’s cost of
capital?
13. Emerging Markets. Firms located in illiquid and segmented emerging markets would benefit from
nationalizing their own cost of capital. What do they need to do, and what conditions must exist for
their efforts to succeed?
14. Cost of Capital for MNEs. Do multinational firms have a higher or lower cost of capital than their
domestic counterparts? Is this surprising?
15. Multinational Use of Debt. Do multinational firms use relatively more or less debt than their
domestic counterparts? Why?
Chapter 13 The Global Cost and Availability of Capital 71
© 2016 Pearson Education, Inc.
even a higher cost of long-term debt for MNEs. Domestic firms rely much more heavily on short and
intermediate debt, which lie at the low cost end of the yield curve.
16. Multinationals and Beta. Do multinational firms have higher lower betas than their domestic
counterparts?
17. The “Riddle.” What is the riddle?
The riddle is an attempt to explain under what conditions an MNE would have a higher or lower debt
18. Emerging Market Listings. Why might emerging market multinationals list their shares abroad?