Who is the Democratic Dentist?

Rick Politician
87345
5/5/2007
I BUS 300
Chapter 11 Homework

I recommend that the Mexican firm issue equity loans, or stock, in foreign countries.  This option will provide them will large sums of capital with no requirement to pay dividends.   Furthermore, issuing stock will increase the public’s knowledge of the company, increasing the name recognition and brand equity.  Employees in domestic market where the stock is issued can now have stock options.  Issuing stock also allows a company to avoid much of the foreign exchange risk.

The depreciation of the Mexican peso could lower stock prices in the foreign market where the stocks were issued.  A company’s stock is equal to all future expected cash flows.  These future expected cash flows will be reduced as the value of the company drops.  This, in turn, will bring down the price of the foreign stock.