Exchange Rate Risk and Capitalization

Deliverable Length: 700–800 wordsCompanies 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):

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  • Default risk
  • Inflation
  • Interest rate risk
  • Stock and market volatility

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