When firms expand operation overseas, they incur a lower cost of capital because they can borrow where the capital is cheapest. they incur a higher cost of capital because their earnings become more volatile. The choice is incorrect because by entering into different markets, multinational companies enjoy less correlated cash flows and hence volatile earnings streams. they have fewer profitable projects to choose from because they face a higher cost of capital. they incur a higher cost of capital because investing in foreign countries is risky