International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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The pros and cons of a Mexican firm taking the route of an Initial Public Offering (IPO), the Global Bond Market, and Eurobonds are all important considerations for a Mexican firm looking to raise capital. An IPO can provide a large influx of capital, but it also comes with the risk of losing control of the company. The Global Bond Market and Eurobonds can provide a more stable source of capital, but they also come with their own risks such as foreign exchange risk and transaction fees. Ultimately, it is important for a Mexican firm to weigh the pros and cons of each option before making a decision.
please help reply to discussion
Initial Public Offering (IPO) - In the chapter we are provided with an example of the Industrial and Commercial Bank of China offering shares of their corporation to the public. The biggest pro of a firm based in Mexico taking this route, would be the gain of capital. A con that comes with this is a loss of control of your company. IF you were to lose majority control over your business, this could have potentially catastrophic impacts.
The Global Bond Market - "Companies will issue international bonds if they believe it will lower their cost of capital" Foreign bonds - On the pro side of foreign bonds, the firm can raise capital in foreign currencies. This opens up more potential investors to the firm. A con of foreign bonds would be the exposure of foreign exchange risk. Foreign exchange risk can be risky, and if the Mexican peso depreciates significantly on the foreign exchange market, this could potentially crush the Mexican capital market.
Eurobonds - Eurobonds are another and…
Which of the following is an example of a firm-specific risk?
The Federal Reserve decreases the federal funds rate
U.S. government announces an increase in corporate tax rate
Bond investor invests in a Japanese investment grade bond and receives coupon payments in Japanese yens
Bond investor learns from the news that the inflation rate is expected to increase next year
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