Survey and Synthesis of Practices in Estimating Cost of Capital of Non-American Firms

Abstract

The purpose of this paper is to presents anecdotal evidence of how financially sophisticated Multi-National Corporations (MNCs) estimate cost of capital. This paper differs from its predecessors in several aspects. The previously published surveys are based on written, closed–end surveys. The questionnaires were sent to a large sample of firms in a specific country or region. The questionnaires often covered a wide array of topics and commonly used multiple-choice or fill-in-the blank questions. So, the questionnaires provided for a limited opportunity to explore subtleties of the topic. The US surveys for obvious reasons do not survey MNCs headquartered outside the US. This paper is an attempt to address that deficiency. Our survey is based on results of telephonic survey method. Another important feature of our survey is that it identifies some ambiguities in the application of cost of capital theory in global environment.