The Cost of Capital and Vlauation of a Two County Firm by...

The article, â€Å" The Cost of Capital and Valuation of a Two-County Firm by Michael Adler†, attempts to extend the theory of valuation and the cost of capital when operating in a multinational corporation. In finance, financing decisions have a great importance due to the optimal capital structure, which can be created through the proper mix of finance. Adler attempts to address the issues for which multinational corporation can plan for optimal control with the restrictions of international capital movements. The ability for a corporation to perform well in the market depends on the efficiency of its capital structure. In general, the capital structure of the company may classify into debt and equity. Most companies have mix capital structure which incorporates the mixture of long-term or short-term debt and equity. Two important issues Adler focuses on within the essay are; the nationality of their investment projects and financing sources and whether they depend on the s tructure of the corporation itself. Can a multinational corporations use the planning objectives structure of the parents and its subsidiaries if the ownership of the corporation is multinational? Corporate structures generally prefer to borrowing over the means of any other types of financing, however the traditional financial theory does not fit easily into a multinational setting. The Financial leverage of a multinational corporation capital structure will increase a shareholder’s wealth whereas its