Reference no: EM13911472
Change in Cost of Capital. Assume that Naperville Co. will use equity to finance a project in Switzerland, while Lombard Co. will rely on a dollar-denominated loan to finance a project in Switzerland, and Addison Co. will rely on a Swiss franc-denominated loan to finance a project in Switzerland. The firms will arrange their financing in one month. This week, the U.S. risk-free long-term interest rate declined, but interest rates in Switzerland did not change. Do you think the estimated cost of capital for the projects by each of these three U.S. firms increased, decreased, or remained unchanged?
Naperville decreased, Lombard Co. decreased, and Addison Co. remains unchanged.
Naperville increased, Lombard Co. increased, and Addison Co. remains unchanged.
Naperville remains unchanged, Lombard Co. remains unchanged, and Addison Co. decreased.
Naperville decreased, Lombard Co. increased, and Addison Co. remains unchanged.
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: Change in Cost of Capital. Assume that Naperville Co. will use equity to finance a project in Switzerland, while Lombard Co. will rely on a dollar-denominated loan to finance a project in Switzerland, and Addison Co. will rely on a Swiss franc-denomi..
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