Established subsidiary in less developed country

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Reference no: EM131999523

Fairfield Corp., a US firm, recently established a subsidiary in a less developed country that consistently experiences an annual inflation rate of 80% or more. The country does not have an established stock market, but loans by local banks are available with a 90% interest rate in the host country. What is a key disadvantage of using this strategy that may cause Fairfield to be no better off than if it paid the 90% interest rate?

Reference no: EM131999523

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