Harley$-$Davidson is considering whether to issue bonds denominated in euros. The case suggests that this might allow the company to take advantage of the low real rates of return in European debt markets, but there are two complications:

First, issuing debt in a currency other than the US dollar might expose Harley$-$Davidson to exchange$-$rate risk.

Second, there are firm$-$specific and industry$-$specific factors that might also affect borrowing rates. The case provides estimates for the yields Harley$-$Davidson could expect for both euro$-$denominated and dollar$-$denominated issues, along with market and peer company data. The questions below are designed to evaluate the desirability of the euro$-$denominated issue.

$1.$ What factors the global capital markets suggest Reverse Yankee: bond issue would provide low cost of funds to Harley$-$Davidson? What factors might offset this benefit? Even if a benefit exists, why might Harley$-$Davidson still choose not to make issue? Conversely, even if a benefit does not exist, why might Harley$-$Davidson still choose to proceed with the issue?