What are the components of the weighted average cost of capital (WACC) and how do they differ for an MNE compared to a purely domestic firm?

What will be an ideal response?

Answer: The WACC considers the proportion or weight of assets financed with debt and the proportion financed with equity. It also looks at the costs of debt and equity financing and the firm's corporate tax rate. The difficulty of such a computation is compounded for an MNE because there are several additional sources of debt financing with different required rates of return and tax rates for an MNE than for a domestic firm. Also, equity may be sourced in several different markets and subject to several different regulations of several different countries. Adding regulatory oversight, multiple sourcing locations, and differing investor expectations may significantly complicate the process of determining an MNE's cost of capital.