Forest Co. produces goods in the United States, Germany, and Australia and sells the goods in the

Question:

Forest Co. produces goods in the United States, Germany, and Australia and sells the goods in the areas where they are produced. Foreign earnings are periodically remitted to the U.S. parent. As the euro’s interest rates have declined to a very low level, Forest has decided to finance its German operations with borrowed funds in place of the parent’s equity investment. Forest will transfer the U.S. parent’s equity investment in the German subsidiary over to its Australian subsidiary. These funds will be used to pay off a floating-rate loan, as Australian interest rates have been high and are rising. Explain the expected effects of these actions on the consolidated and of Forest Co. Given the strategy to be used by Forest, explain how its exposure to risk may have changed.

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...