Discuss the pros and cons of a mnc having a centralized cash

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Question 1: Wiley Corporation has an optimal debt ratio of 37percent. Its cost of equity capital is 10.8 percent and its before-tax borrowing rate is 4 percent. Given a marginal tax rate of 40 percent, calculate:

A. the weighted-average cost of capital, and

B. the cost of equity for an equivalent all-equity financed firm.

Question 2: Discuss the pros and cons of a MNC having a centralized cash manager handle all investment and borrowing for all affiliates of the MNC versus each affiliate having a local manager who performs the cash management activities of the affiliate.

Reference no: EM132619732

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