Exam 13: Raising Equity and Debt Globally

The authors identify four alternative financial instruments for sourcing equity abroad. Identify and explain one of these techniques. In your answer provide a motivation as to why a firm would wish to choose this particular technique for raising equity abroad.

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

Which of the following is NOT an advantage of ADRs to U.S. shareholders?

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 is the firm's new cost of equity after the international issue?

Not all firms have the same optimal capital structure. Factors that might influence a firm's capital structure include

Level III ADR commitment applies to

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

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

Which of the following is the typical order of sourcing capital abroad?

An MNE may cross list its shares on a foreign stock exchange so that it can

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

Empirical evidence shows that new issues of equity by domestic firms in the U.S. market typically has a ________ stock price reaction and new equity issues in the U.S. markets by foreign firms with segmented domestic markets have a ________ stock price reaction.

Which of the following would likely be the ultimate step in a firm's efforts to source equity globally?

Which financial economists are most closely associated with the financial theory of optimal capital structure?

What are the two schools of thought regarding the worldwide trend toward increased financial disclosure by publicly traded firms. Explain which school of thought you hold to and why.

The Euro-medium-term-note (EMTN) has filled a substantial niche market in global financing. What are the distinguishing characteristics of the EMTN and why is it such a popular form of financing for MNEs?