what a Global Cost is and what it means to have availability of Capital?

Expert Solution

Global costs in sourcing capital referes to the costs associated with getting capital across countries. It is more important for companies having presence in many countries across globe. The availibility of capital in the countries has an effect on its cost. For example a US multinational trying to source funds in India where capital market is not as good as that in US, will lead to premium in cost of capital. The availibility of capital means that capital can be obtained easily without much efforts. It also means that capital will have low premiums related to maturity, credit risk and segment risks.
Capital markets are segmented due to factors such as excessive regulatory control, perceived political risk, lack of transparency, asymmetric availability of information, foreign exchange risks, corporate governance differences, and many other market imperfections. This lead to rise in cost of capital and give rise to global costs of funds and illiquid markets.

jeff jeffy answered 2 years ago

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