What factors should be considered in deciding whether the cost of capital for a foreign affiliate should be higher, lower, or the same as the cost of capital for a comparable domestic operation?
Answer to relevant QuestionsAccording to an article in Forbes, ''American companies can and are raising capital in Japan at relatively low rates of interest. Dow Chemical, for instance, has raised $500 million in yen. That cost the company over 50% ...United Airlines inaugurated service to Japan and wants to finance the purchase of Boeing 747s to service that route. The CFO for United is attracted to yen financing because the interest rate on yen is 300 basis points lower ...What characteristics of foreign securities lead to diversification benefits for American investors?Because ADRs are denominated in dollars and are traded in the United States, they present less foreign exchange risk to U.S. investors than do the underlying foreign shares of stock. Comment.1. What barriers to entry has Goodyear created or taken advantage of?2. Goodyear has production facilities throughout the world. What competitive advantages might global production provide Goodyear?3. How do tire ...
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