Exam 13: Sourcing Equity and Debt Globally

Level III ADR commitment applies to

One of the most important factors in making debt less expensive than equity is

Financial theory has at last provided us with a single optimal capital structure for domestic firms.

Level ________ is the easiest standard to satisfy for issuing ADRs.

ADRs are a popular investment tool for many U.S.investors.In recent years several alternatives for investing in foreign equity securities have become available for U.S.investors,yet ADRs remain popular.Define what an ADR is and provide at least three examples of the advantages they may hold over alternative foreign investment vehicles for U.S.investors.

Which of the following were NOT identified by the authors as an alternative instrument to source equity in global markets?

Internal sources of funds for a foreign subsidiary of a MNE may come from the parent company but not from a sister subsidiary.Funding from sister subsidiaries are considered external funding.

Of the following,which was NOT cited by the authors as a valuable function provided by the Eurocurrency market?

For most firms,the cost of capital decreases to a low point as the firm ________ debt financing.Beyond some optimal level,the cost of capital increases as the amount of debt ________.

In addition to gaining liquidity,which of the following could also be considered a legitimate reason for cross-listing equity?

Most financial theorists believe that the optimal capital structure is a ________ with a debt to total value ratio somewhere around ________.

Wallet Drug Company has just recently raised money abroad for the first time in the history of the firm.Prior to the recent equity issue abroad,the firm had a D/V ratio of 40%,an effective tax rate of 30%,a before-tax cost of debt of 9%,and a domestic beta of 1.3.The expected return on the market portfolio was 13% and the risk-free rate was 5%.After the equity issue,Wallet Drug has a D/V ratio of 50%,their after-tax cost of debt has not changed,nor has the effective tax rate,the firm's international beta is 1.0,the expected return on the market portfolio is only 12%,and the risk-free rate is still 5%.What was the firm's WACC prior to the issue of new common stock abroad?

Of the following,which is NOT considered to be an advantage to MNEs of having a financial structure adhere to local debt norms?

In general,which has the shorter maturity and is more appropriate for funding short-term inventory needs?

In theory,a MNE should support ________ debt ratios than a purely domestic firm because their cash flows are ________.

Eurobanks are

Level II ADRs must meet

Which of the following is NOT a barrier to cross listing shares?

If a MNE needed to obtain,outside of its domestic market,medium-term credit with an established secondary market it would most likely pursue ________.

Investment banking services include which of the following?