Exchange Rate Risk and Capitalization
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