The Cost of Capital for Foreign Investments

Traders and other undertakers may, no doubt, with great propriety, carry on a very considerable part of their projects with borrowed money. In justice to their creditors, however, their own capital ought to be, in this case, sufficient to ensure, if I may say so, the capital of those creditors; or to render it extremely improbable that those creditors should incur any loss, even though the success of the project should fall very short of the expectations of the projectors.



  • To determine the cost of capital for foreign investments and identify those circumstances under which that cost should be higher, lower, or the same as that for comparable domestic projects
  • To identify and address the key issues involved in applying the capital asset pricing model to estimate the cost of capital for foreign projects
  • To illustrate the impact of globalization on the cost of capital
  • To calculate the effective dollar costs of foreign currency borrowing taking into account interest rates exchange rate changes and taxes
  • To identify the relevant factors and trade-offs in establishing a company's worldwide capital structure
  • To calculate the value of below-market financing opportunities

A central question for the multinational corporation is whether the required rate of return on foreign projects should be higher, lower, ...

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