Toyota corporation is a Japanese automotive manufacturing company. The CFO is considering opening their new factory to assemble trucks in North Carolina, USA. The real discount rate required for the project is 12%. The inflation rate in Japan is 2%, and the inflation rate in the United States is 4%. 1.)Compare the nominal discount rates for the two project options, the first option is doing the project as an investment in US dollar, and the second option in their local currency the Japanese Yen.
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Toyota corporation is a Japanese automotive manufacturing company. The CFO is considering opening their new factory to assemble trucks in North Carolina, USA. The real discount rate required for the project is 12%. The inflation rate in Japan is 2%, and the inflation rate in the United States is 4%.
1.)Compare the nominal discount rates for the two project options, the first option is doing the project as an investment in US dollar, and the second option in their local currency the Japanese Yen.
2.) Evaluate and choose the best option, include in your answer the significance of inflation rates in relation to Foreign Investment of multinational corporations.
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