For a firm confronted with a fixed schedule of possible new investments,any policy that lowers the firm's cost of capital will increase the profitable capital expenditures the firm takes on and increase the wealth of the firm's shareholders.One such policy is
A)internationalizing the firm's capital budgeting opportunities.
B)internationalizing the firm's cost of capital.
C)investing in riskier projects financed with debt.
D)none of the options

Question

Quizplus · Accepted Answer

By internationalizing the firm's cost of capital, the firm can tap into lower cost financing options in other countries, which would lower the overall cost of capital for the firm. This, in turn, would increase the profitability of potential capital expenditures, resulting in increased wealth for the shareholders. Internationalizing the capital budgeting opportunities or investing in riskier projects financed with debt may not necessarily lower the cost of capital, and may even increase the firm's overall risk. Therefore, option B is the best choice.

For a Firm Confronted with a Fixed Schedule of Possible