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currency

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › currency

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 24, 2016 at 5:21 pm #334953
    almosthome
    Member
    • Topics: 10
    • Replies: 19
    • ☆

    Hi John,

    How does FOREX risk effect cost of capital? Thank you in advance.

    Regards,
    Anna

    August 25, 2016 at 7:31 am #335057
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54835
    • ☆☆☆☆☆

    If the business has transactions in a foreign currency or has borrowing in a foreign currency, then the foreign exchange risk involved makes the business as a whole more risky.
    If the business is more risky then shareholders will want a higher return, this increases the cost of equity which in turn will increase the WACC.

    August 26, 2016 at 3:32 am #335225
    almosthome
    Member
    • Topics: 10
    • Replies: 19
    • ☆

    Thank you for your prompt reply!

    August 26, 2016 at 7:07 am #335260
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54835
    • ☆☆☆☆☆

    You are welcome 🙂

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