Exchange Rate Risk and Capitalization

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Business Finance

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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

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Running head: EXCHANGE RATE RISK AND CAPITALIZATION

Exchange Rate Risk and Capitalization
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EXCHANGE RATE RISK AND CAPITALIZATION

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Exchange Rate Risk and Capitalization
Companies are faced with multiple difficulties thus affecting their profitability
capabilities. Hence, to ensure that companies attain their objectives, there is the need of
implementing strategies of cost management, which involves proficient cost financing
possibilities. Organizations have employed increased methods of financing options to raise
capital for growth and expansion objectives. The conventional means of financing include stock
equity, bond debt, and preferred stock equity. Nevertheless, these financing options of the
organizations are encountered with abundant risks including default risks, ...


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