Question

An MNC is considering to raise financing in Malaysia or Australia. If the MNC were to minimise the cost of financing, where should it raise its financing? Assume that the MNC would issue shares and bonds in Malaysia or Australia. Explain your recommendation.

Answer 1

if the multinational corporation has to arrange financing in either Malaysia or Australia then I would be always advising to raise the money in developinh countries like Malaysia because Malaysia is not as developed as Australia and the currencies are also reflecting those differences because the cost of borrowing in Malaysia would be significantly lower than the cost of borrowing in Australia.

when considering to raise the financing a company should always be trying to raise from such countries whose currency are likely to depreciate against the domestic country and it will be helpful in maintenance of a lower cost of overall financing so while raising the cost of capital I should always be advising to raise it from Malaysia, because it would be leading to a lower cost of capital and it would be reflected in higher profits.

I would always be advising to issue bonds in Malaysia and cost of debt issuance would be lower in Malaysia because of higher currency depreciation likelihood.

So my advice would be to raise the capital from Malaysia rather than Australia.