Explain how characteristics of MNCs can affect the cost of capital.

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The characteristics of MNC that affect the cost of capital :

The size of the MNC : As the MNC's are larger in size, they are sometimes provided relief from the creditors and they can achive a smaller floatation costs while computing the costs of capital.
Easy access to international funds: the MNC's can easily access funds , through the international market at a lower cost.
Exposure to exchange rate fluctuations : as the MNC's have a higher exposure to exchange rate fluctuations, there might be instances when the cash flows are uncertain and the rate of bankruptcy is higher.
A higher exposure to country risk : As the MNC's are internationally invested and a higher proportion of their assets are invested in the foreugn countries, they have a higher country risk.
MNC's have international diversification : As the MNC's have a benefit of international diversification, the cash flows are more stable and the probability of bankruptcy is lower.

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Explain how characteristics of MNCs can affect the cost of capital.

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