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Benefits of the international capital markets

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1. What are some benefits of the international capital markets? Does borrowing a portfolio of currencies offer any possible advantages over the borrowing of a single foreign currency?

2. Why would an organization consider investing short term funds overseas? What techniques are available to multinational firms to speed up their cash collection activities?

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The solution explains the benefits of the international capital markets.

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International Markets

1. What are some benefits of the international capital markets? does borrowing a portfolio of currencies offer any possible advantages over the borrowing of a single foreign currency?

International Risk

One factor that distinguishes the international investment decisions from the domestic investment decisions is that cash flows are earned in foreign currency. This fact should be considered while estimating the incremental cash flows. Moreover Firms must constantly assess the business environments of the countries they are already operating in as well as the ones they are considering investing in. This WACC should be adjusted by the country risk.
BENEFITS

The firm can minimize the cost of funds keeping risk at the lowest level. It can raise funds below the market rate. In international capital markets the firm may be capable of funds below market rate due to government subsidies, tax asymmetries and government regulations.

Borrowing a portfolio of currencies offer advantages over the borrowing of a single foreign currency in form of:
1. It provides a natural hedge if the operations are also there of multinational ...

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