Reference no: EM132715386

A. Target Capital Structure. Spurs Corp. is a U.S.-based MNC with subsidiaries in various less developed countries where stock markets are not well established. How can Spurs still achieve its "global" target capital structure of 60 percent debt and 40 percent equity if it plans to use only debt financing for the subsidiaries in these countries?

B. Interaction between Financing and Investment. Spurs Corp. is considering establishing a subsidiary in either France or Canada. The subsidiary will be mostly financed with loans from the local banks in the host country chosen. Spurs Corp. has determined that the revenue generated from the Canadian subsidiary will be slightly more favorable than the revenue generated by the Franch subsidiary, even after considering tax and exchange rate effects. The initial outlay will be the same, and both countries appear to be politically stable. Spurs Corp. decides to establish the subsidiary in Canada because of the revenue advantage. Do you agree with its decision? Explain.