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What Are the Components of the Weighted Average Cost of Capital

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Essay

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?


Definitions:

Future Values

The projected amount of money or value of an investment at a specified future date, accounting for factors like interest rates and returns.

Investment 1

The strategy of apportioning capital with the expectation of generating financial returns.

Compounded Quarterly

Describes the frequency with which interest is added to the principal balance of a loan or deposit four times a year, increasing the total amount of interest earned or paid.

Maturity Value

The amount payable to the investor at the end of a fixed-term investment, including both the principal and the interest.

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