Imagine you work for a company that has been planning to open a new factory in France in two years. The president of the company had received an estimate for 300 million Euros for the plant investment. The cost of capital for the investment was assumed to be 10%. You are part of the taskforce that provided the company president with this assessment. However, recently the sovereign credit rating of the country was down-graded by a major transnational credit-rating agency. Now, the company president has concerns about how this might impact the cost of capital and the projected rate of return on the investment.

For your post this week, research the Internet to find resources that discuss how sovereign credit ratings impact the cost of capital. Then, write an e-mail to the company president and post it in the discussion forum. In your e-mail, answer the following question: How might this credit downgrading impact the rate of return for investment for the new plant?