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The cost of capital in the international firm
Author(s) -
Giddy Ian H.
Publication year - 1981
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090020407
Subject(s) - subsidiary , obligation , capital call , capital (architecture) , subsidy , cost of capital , monetary economics , business , investment (military) , economics , finance , microeconomics , economic capital , market economy , individual capital , multinational corporation , human capital , law , profit (economics) , archaeology , politics , political science , history
This paper argues that the international firm should use the firm's global weighted average cost of capital to evaluate investment decisions, domestic and international, and to judge the performance of affiliates at home and abroad. The paper discusses the adjustment necessary to quantitate exchange risk and to account for financing that is subsidized or tied to particular investments. Foreign subsidiaries, it is argued, do not have an independent capital structure because their liabilities are explicitly or implicitly the obligation of the parent firm.