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So far we've discussed the FED's monetary policy position and the inflationary pressures working their way into the system. As you study Chapter 10's discussion
So far we've discussed the FED's monetary policy position and the inflationary pressures working their way into the system. As you study Chapter 10's discussion on the Weighted Average Cost of Capital, let's follow through on how changes in interest rates and increasing inflation affect a corporation's operations and profitability by answering the following questions:
- When interest rates increase how does that affect the cost of borrowing?
- Do higher rates also impact the cost of equity? If so, how and why?
- What are the risks to profitability?
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