Financing Decision
Response to the following problem:
Veer Co. is a U.S.-based MNC that has most of its operations in Japan. Since the Japanese companies with which it competes use more financial leverage, it has decided to adjust its financial leverage to be in line with theirs. With this heavy emphasis on debt, Veer should reap more tax advantages. It believes that the market's per- ception of its risk will remain unchanged, since its financial leverage will still be no higher than that of its Japanese competitors. Comment on this strategy.