There were many topics touched by this article that were covered in the class. For example, the cost of capital is one them. The companies may have not analyzed thoroughly the cost of raising the capital for their projects. Investors require higher rate of return when they are investing in a riskier firms. This in turn raise the cost of borrowing for the companies that are risky. Based on this article, it c...
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...ed with the company defaulting on their bond payments. On the other hand, companies with low credit ratings have the challenge to attract the potential investors. Therefore, they have to increase the interest or discount rate on their bonds to raise capital. This will help them raise the capital needed, but the cost of capital will also increase. Investors require high rate of return because of the risk associated with firm’s ability to pay the investors. Therefore, it is essential for a firm to thrive to keep the credit rating in good standing as it will help the firm to sell its bonds at a low discount rate due to less risk of defaulting on the payments compared to companies that have a low rating.
Cherney, M. (2015, Nov 24). Vodafone postpones its bond sale in the U.S. Wall Street Journal Retrieved from http://search.proquest.com/docview/1735567452?accountid=13013
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