In addition to WACC, other factors must be considered prior to investing in new market and foreign country. In this case, the automobile manufacturer is planning to expand and build $800 million plant in China. Factors such as consumer need, exchange risks, barriers, foreign government and political risk, and environmental requirements should carefully weight as it will affect the projected returns.
First factor must be considered is the consumers in the target market. In the new market, we must consider the competition of products and pricing. Comparing to an established car manufacture, as a new company in that country, we may not have sufficient buying power to purchase raw materials (Leddy, 2013). This will resulted in higher cost
First factor must be considered is the consumers in the target market. In the new market, we must consider the competition of products and pricing. Comparing to an established car manufacture, as a new company in that country, we may not have sufficient buying power to purchase raw materials (Leddy, 2013). This will resulted in higher cost