Exchange Rate Risk and Capitalization IP
700–800 words Use APA format and referecnes.
Companies seek the lowest average rate of financing costs to capitalize the business. Common sources of financing are as follows:
- Common stock equity
- Preferred stock equity
- Bond debt
Explain how the following risks may affect these 3 sources of financing in international capital markets. In addition, explain how these risks may influence a company’s international weighted average cost of capital (WACC):
- Default risk
- Inflation
- Interest rate risk
- Stock and market volatility
Answer Preview
Stock and market volatility risk is the uncertainty innate with a market segment or the whole market. The return may not be as expected since the stock prices are always fluctuating daily. Volatility measure risks by evaluating the behavior of the movement in money from stocks (Lee, 2015). Therefore, market risk will affect the bonds by reducing the…
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