Cost of Capital and Multinational Corporations

By

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION3

Background and Importance of the Study3

Problem Statement4

Rationale of the Study4

Aims and Objectives4

Theoretical Framework5

Research Questions6

CHAPTER 2: LITERATURE REVIEW7

CHAPTER 3: METHODOLOGY9

Rationale for chosen design9

Search Strategy9

Types of research evidence to be included in the search & review10

Study selection criteria11

How the quality of the evidence will be assessed and reviewed12

Data Extraction strategy12

Consideration of Rigour12

Consideration of Ethics13

Data Analysis13

References14

Appendices15

Gantt chart15

CHAPTER 1: INTRODUCTION

Background and Importance of the Study

In contemporary times, companies cannot remain confined themselves to their home country as it is necessary for continuous survival that company continued to exhibit growth. Today MNCs are some of the biggest organizations that have operations around the world. Their existence in several countries indicates not only stability but also good prospects. When it comes to financial strategy, these companies have successfully implemented models at domestic level. However, as the corporate world evolved, the same approach cannot be transferred to other localities. Cost of capital constitutes an important ingredient of companies' financial strategy. Determining cost of capital timely and accurately is very crucial for all the decision making process. Traditional approaches were designed in view of the circumstances that prevailed in one country. Nevertheless, the same approach cannot be extended to determine cost of capital since multinational corporations have foreign subsidiaries present in diverse geographical locations and each bearing a unique set of risk which might/might not be assessed in the traditional methods. Therefore, keeping in view the dynamics of the corporate world, limitations of the traditional models and increasing complexity of transactions, it is important for these companies to introduce superior models for determining cost of capital which can incorporate all the information including risks affecting the business entities. This will in turn facilitate the decision making process and contribute towards carrying out positive actions on the part of management.

Problem Statement

Companies expanding across different countries need to introduce superior financial models to incorporate risks that are specific to the projects and cannot be assessed by traditional methods.

Rationale of the Study

Before commencing any business and irrespective of the fact that it's local or international, there are many considerations which must be taken into account before moving on with the business plan. Subsequent to the incorporation of business established at domestic level, management might experiences high performance for which they decide to expand in to other markets too. While expansion is always good for growth but management must also be able to regard all the risks and uncertainties associated with the new opportunity. The rationale behind conducting this research is to present different models for determining cost of capital more accurately. By presenting these models, it will facilitate the management to identify most appropriate approach considering the situation and employ it to accurately asses the cost of capital.

Aims and Objectives

The fundamental aim of this research is to study the advanced level of financial models for determining cost of capital including both equity and debt. Moreover, which model can work best under which circumstances? These aims would be achieved by attaining ...