Efnisyfirlit

• Front Matter
• Contents
• Preface
• Approach
• Pedagogy
• Additional Resources
• Selected Currencies and Symbols
• Symbols and Acronyms
• PART 1 The Global Financial Management Environment
• 1 Introduction to International Financial Management
• LEARNING OBJECTIVES
• 1.1 The Rise of the International Company
• Mini-Case General Electric Globalizes Its Medical Systems Business
• Evolution of the Multinational Corporation
• FIGURE 1.1 Selected Transnational Corporations
• FIGURE 1.2 Volkswagen’s Brands
• FIGURE 1.3 Location of Volkswagen’s Main Production Facilities
• FIGURE 1.4 Volkswagen Group Sales in 2012
• FIGURE 1.5 The Stock of Worldwide Foreign Direct Investment: 1980–2012
• Search for Raw Materials.
• Market Seeking.
• FIGURE 1.6 Flows of Foreign Direct Investment to Developing Countries: 1970–2012 (Billions of U.S. Dollars)
• Cost Minimization.
• FIGURE 1.7 Offshoring and Outsourcing—Some Definitions
• Application Honda Builds an Asian Car Factory
• Knowledge Seeking.
• Keeping Domestic Customers.
• Exploiting Financial Market Imperfections.
• The Process of Overseas Expansion by Multinationals
• FIGURE 1.8 Typical Foreign Expansion Sequence
• Exporting.
• Overseas Production.
• Licensing.
• Tradeoffs Between Alternative Modes of Overseas Expansion.
• A Behavioral Definition of the Multinational Corporation
• FIGURE 1.9 How Dell Reduces the Order-to-Delivery Cycle
• Mini-Case Siemens: “Think More Like Visionaries”20
• The Global Manager
• 1.2 The Internationalization of Business and Finance
• Political and Labor Union Concerns about Global Competition
• Application The European Union Pays a Price to Stop Creative Destruction
• FIGURE 1.10A Real GDP Growth United States Versus Core EU-15 1996=100
• FIGURE 1.10B Unemployment Rate: United States Versus EU
• FIGURE 1.10C Labor Productivity Growth United States Versus EU 1995=100
• Application The Asian Tigers Fall Prey to World Financial Markets
• FIGURE 1.11A Currency Devaluations
• FIGURE 1.11B Stock Market Drop
• Consequences of Global Competition
• Application Japanese Competition Affects the U.S. Car Industry
• Application The Myth of a Deindustrializing America
• FIGURE 1.12 Winners and Losers: Percentage Change in Manufacturing Employment From 1995 to 2002
• FIGURE 1.13 How Logitech’s $40 Mouse is Dissected
• FIGURE 1.14 U.S. Unemployment Rates and New Job Creation
• FIGURE 1.15A Real Compensation per Hour and Output per Hour for American Nonfarm Workers: 1959–2007
• FIGURE 1.15B Real Compensation per Hour Various with Output per Hour for American Nonfarm Workers: 1959–2007
• 1.3 International Financial Management: Theory and Practice
• Criticisms of the International Corporation
• Functions of Financial Management
• Theme of This Text
• Relationship to Domestic Financial Management
• Arbitrage.
• Market Efficiency.
• Capital Asset Pricing.
• The Importance of Total Risk
• The Global Financial Marketplace
• The Role of the Financial Executive in an Efficient Market
• 1.4 Outline of the Text
• The Global Financial Management Environment
• Currency and Derivatives Markets
• Managing Currency Risks
• Financing International Operations
• International Capital Budgeting
• International Management of Working Capital
• QUESTIONS
• WEB RESOURCES
• WEB EXERCISES
• APPENDIX 1A The Origins and Consequences of International Trade
• The Gains from Trade
• Specialized Factors of Production
• Monetary Prices and Exchange Rates
• Tariffs
• QUESTIONS
• 2 Exchange Rate Determination
• LEARNING OBJECTIVES
• 2.1 Setting the Equilibrium Spot Exchange Rate
• Demand for a Currency
• Supply of a Currency
• FIGURE 2.1 Equilibrium Exchange Rates
• Factors that Affect the Equilibrium Exchange Rate
• Relative Inflation Rates.
• FIGURE 2.2 Impact of U.S. Inflation on the Equilibrium Exchange Rate
• Relative Interest Rates.
• Relative Economic Growth Rates.
• Political and Economic Risk.
• Calculating Exchange Rate Changes
• Application The Ruble is Rubble
• FIGURE 2.3A The Ruble is Rubble
• FIGURE 2.3B The Ruble is Rubble Round Two
• Application Calculating Yen Appreciation Against the U.S. Dollar
• Application Calculating U.S. Dollar Appreciation Against the Thai Baht
• Illustration Calculating Afghani Appreciation Against the Pakistani Rupee
• 2.2 Expectations and the Asset Market Model of Exchange Rates
• Mini-Case Asian Currencies Sink in 1997
• The Nature of Money and Currency Values
• Application Emerging Market Currency Turmoil Hits India
• FIGURE 2.4 The Indian Rupee Against the U.S. Dollar
• Central Bank Reputations and Currency Values
• Price Stability and Central Bank Independence.
• FIGURE 2.5 Central Bank Independence, Inflation, and Economic Growth*
• Application Inflation Dies Down Under
• FIGURE 2.6 Inflation Dies Down Under
• Application The Bank of England Gains Independence
• FIGURE 2.7 British Inflation Expectations Fall as the Bank of England Gains Its Independence
• Currency Boards.
• Dollarization.
• Mini-Case Argentina’s Bold Currency Experiment and Its Demise
• FIGURE 2.8 Argentina Ends Hyperinflation
• FIGURE 2.9 Dollarization Stabilizes the Sucre
• Expectations and Currency Values.
• Application Sudan Devalues Its Pound
• Mini-Case The U.S. Dollar Sells Off
• 2.3 The Fundamentals of Central Bank Intervention
• How Real Exchange Rates Affect Relative Competitiveness
• FIGURE 2.10 Advantages and Disadvantages of a Strong Euro and a Weak Euro
• FIGURE 2.11 The Value of the Euro Versus the U.S. Dollar: 1999–2013
• Foreign Exchange Market Intervention
• Mini-Case A Yen for Yuan
• Mechanics of Intervention.
• Application Switzerland Tries to Protect Its Economy by Capping the Value of Its Currency
• FIGURE 2.12 Swiss Franc Versus the Euro
• Sterilized Versus Unsterilized Intervention.
• The Effects of Foreign Exchange Market Intervention
• FIGURE 2.13 Bank of Japan Intervention Fails to Stem the Rise in the Yen
• Application Japan Weakens its Currency
• 2.4 The Equilibrium Approach to Exchange Rates
• Disequilibrium Theory and Exchange Rate Overshooting
• FIGURE 2.14 Exchange Rate Overshooting According to the Disequilibrium Theory of Exchange Rates
• The Equilibrium Theory of Exchange Rates and Its Implications
• 2.5 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 3 The International Monetary System
• LEARNING OBJECTIVES
• 3.1 Alternative Exchange Rate Systems
• Application Instability Prevails in the International Monetary System
• The Trilemma and Exchange Rate Regime Choice
• FIGURE 3.1 The Trilemma and Exchange Rate Regime Choice
• FIGURE 3.2 Typical Currency Control Measures
• Free Float
• FIGURE 3.3 Supply and Demand Curve Shifts
• FIGURE 3.4A Fluctuating Exchange Rates
• FIGURE 3.4B Actual Changes in the Dollar/Euro Exchange Rate: May 1–9, 2008
• Managed Float
• Target-Zone Arrangement
• Fixed-Rate System
• Mini-Case The BRICs Solve the Trilemma with Different Exchange Rate Regimes
• FIGURE 3.5 BRIC Exchange Rates (Normalized to 2000)
• 3.2 A Brief History of the International Monetary System
• FIGURE 3.6 Wholesale Price Indices: Pre-World War I
• FIGURE 3.7 Consumer Price Indices (CPI): Post-World War II
• The Classical Gold Standard
• FIGURE 3.8 The Price-Specie-Flow Mechanism
• How the Classical Gold Standard Worked in Practice: 1821–1914
• The Gold Exchange Standard and Its Aftermath: 1925–1944
• Competitive Devaluations.
• Bretton Woods Conference and the Postwar Monetary System.
• Role of the IMF.
• Role of the World Bank.
• Role of the Bank for International Settlements.
• Mini-Case Competitive Devaluations in 2003, Return in 2010
• The Bretton Woods System: 1946–1971
• Lessons and Red Flags from Bretton Woods.
• The Post-Bretton Woods System: 1971 to the Present
• FIGURE 3.9 Value of the U.S. Dollar in Terms of Euro, Yen, and Pounds: 1973–2014
• FIGURE 3.10 Effects of Government Actions and Statements on the Value of the 1987 Dollar
• Application Global Financial Crisis Boosts the U.S. Dollar
• FIGURE 3.11 U.S. Dollar Rises on Global Financial Crisis
• Assessment of the Floating-Rate System
• Increasing Currency Volatility.
• Requirements for Currency Stability.
• 3.3 The European Monetary System and Monetary Union
• The Exchange-Rate Mechanism
• Lessons from the European Monetary System
• The Currency Crisis of September 1992
• The Catalyst.
• FIGURE 3.12 Defending the ERM Required High Interest Rates in Europe
• The High Cost of Intervention.
• The Exchange Rate Mechanism is Abandoned in August 1993
• The Catalyst.
• Governments Surrender to the Market.
• A Postmortem on the EMS.
• FIGURE 3.13 The European Monetary System Forces Convergence Towards Germany’s Inflation Rate
• European Monetary Union
• Maastricht Convergence Criteria.
• Launch of the Euro.
• FIGURE 3.14 Conversion Rates for the Euro
• EMU and the European Welfare State.
• Application Sweden Rejects the Euro
• Consequences of EMU.
• Performance of the Euro.
• FIGURE 3.15 Comparative Statistics for the EMU Countries
• FIGURE 3.16 The Euro Rides a Rollercoaster
• Optimum Currency Area
• Application The French Say Non to a European Constitution and the Euro Responds
• FIGURE 3.17 The Euro Tumbles in Response to the “No” Vote on the European Constitution in 2005
• Mini-Case The Euro Reacts to New Information
• Cracks in the Eurozone–the Periphery States Fracture.
• FIGURE 3.18 Ten-Year Government Bond Yields
• The Catalyst—Divergences in Prices.
• FIGURE 3.19 Unit Labor Costs
• FIGURE 3.20 Competitiveness Diverges as Real Exchange Rates are Out of Sync
• FIGURE 3.21 Interest Rates Diverge
• Euro Structural Flaws.
• Disparate Growth Rates Heightened Tensions.
• FIGURE 3.22 Government Debt/GDP and Deficit/GDP Ratios for the PIIGS (2011)
• Mini-Case A Greek Tragedy
• FIGURE 3.23 Yields on 10-Year Government Bonds for the PIGS
• Mini-Case A Wounded Celtic Tiger Has Its Paws Out
• Lessons from EMU and the Euro
• Exchange Rate Regimes Today
• 3.4 Emerging Market Currency Crises
• Transmission Mechanisms
• Trade Links.
• Financial System.
• Debt Policy.
• Origins of Emerging Market Crises
• Moral Hazard.
• Fundamental Policy Conflict.
• Policy Proposals for Dealing with Emerging Market Crises
• Currency Controls.
• Freely Floating Currency.
• Permanently Fixed Exchange Rate.
• Better Information.
• 3.5 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 4 Currencies: Expectations, Parities, and Forecasting
• LEARNING OBJECTIVES
• 4.1 Arbitrage and the Law of One Price
• FIGURE 4.1 Five Key Theoretical Relationships among Spot Rates, Forward Rates, Inflation Rates, and Interest Rates
• Mini-Case Oil Levies and the Law of One Price
• 4.2 Purchasing Power Parity
• FIGURE 4.2 The Big Mac Hamburger Standard as of July 2013
• Application Calculating the PPP Rate for the Swiss Franc
• FIGURE 4.3 Purchasing Power Parity
• The Lesson of Purchasing Power Parity
• Application Calculating the Real Exchange Rate for the Japanese Yen
• Application How Undervalued Is the Chinese Yuan?
• Expected Inflation and Exchange Rate Changes
• The Monetary Approach
• Empirical Evidence
• FIGURE 4.4 Retail Prices for Coca Cola Around the World
• FIGURE 4.5 Purchasing Power Parity Empirical Data, 1993–2006
• FIGURE 4.6 Purchasing Power Party and Actual Exchange Rates
• 4.3 The Fisher Effect
• Application Central Banks’ Low Interest Policies Lead to Negative Real Interest Rates
• FIGURE 4.7 The Fisher Effect
• Empirical Evidence
• FIGURE 4.8 Fisher Effect: Nominal Interest Rate Versus Inflation Rate for 28 Developed and Developing Countries as of November 2013
• FIGURE 4.9 The Distinction Between Capital Market Integration and Capital Market Segmentation
• FIGURE 4.10 Real Interest Rate Versus Nominal Interest Rate for 28 Developed and Developing Countries as of May 2007
• Adding Up Capital Markets Internationally.
• 4.4 The International Fisher Effect
• Illustration Using the IFE to Forecast US$ and SFr Rates
• FIGURE 4.11 International Fisher Effect
• Empirical Evidence
• Application The Carry Trade
• Application Iceland’s Economy Heats Up and then Freezes Over
• 4.5 Interest Rate Parity Theory
• FIGURE 4.12 An Example of Interest Rate Parity
• Application Covered Interest Arbitrage between London and New York
• FIGURE 4.13 An Example of Covered Interest Arbitrage
• FIGURE 4.14 Interest Rate Parity Theory
• Application Using Interest Rate Parity to Calculate the $/¥ Forward Rate
• Empirical Evidence
• FIGURE 4.15 Uncovered and Covered Interest Rate Differentials (U.S. $ Versus Other Currencies)
• Application Computing the Covered Interest Differential When Transaction Costs Exist
• 4.6 The Relationship Between the Forward Rate and the Future Spot Rate
• FIGURE 4.16 Relationship Between the Forward Rate and the Future Spot Rate
• Application Using UFR to Forecast the Future $/€ Spot Rate
• Empirical Evidence
• 4.7 Currency Forecasting
• Requirements for Successful Currency Forecasting
• FIGURE 4.17 Forecasting in a Fixed-Rate System
• Market-Based Forecasts
• Forward Rates.
• Interest Rates.
• Model-Based Forecasts
• Fundamental Analysis.
• Application Using PPP to Forecast the South African Rand’s Future Spot Rate
• Technical Analysis.
• Model Evaluation
• Application The Distinction Between an Accurate Forecast and a Profitable Forecast
• Forecasting Controlled Exchange Rates
• 4.8 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• INTERNET EXERCISES
• BIBLIOGRAPHY
• 5 The International Monetary System and the Balance of Payments
• LEARNING OBJECTIVES
• 5.1 Balance-of-Payments Categories
• FIGURE 5.1 Eurozone Balance of Payments for 2013 (€ Billions)1
• FIGURE 5.2 Examples of Entries in the Eurozone Balance-of-Payments Accounts
• Current Account
• FIGURE 5.3 Current-Account Balances as a Percentage of GDP (2011)
• Capital Account
• Financial Account
• Balance-of-Payments Measures
• Application Apple’s iPhone is Not Really Made in China
• FIGURE 5.4 Assembled But Not Really “Made in China”
• The Missing Numbers
• 5.2 The International Flow of Goods, Services, and Capital
• Mini-Case The Bank of Korea Reassesses Its Reserve Policy
• Domestic Saving and Investment and the Financial Account
• The Link between the Current and Financial Accounts
• FIGURE 5.5 The Trade Balance Falls as Spending Rises Relative to GDP
• FIGURE 5.6 Linking National Economic Activity with Balance-of-Payments Accounts: Basic Identities
• FIGURE 5.7 International Investment Position of the United States: 1976–2010
• Government Budget Deficits and Current-Account Deficits
• The Current Situation
• FIGURE 5.8 Global Current-Account Balances: 2000 to 2012
• Application Invasion of the Sovereign Wealth Funds
• 5.3 Coping with the Current-Account Deficit
• Currency Depreciation
• FIGURE 5.9 The Dollar and the Deficit*
• Lagged Effects.
• Application Chinese Exports to the United States Rise along with the Yuan
• FIGURE 5.10 Chinese Exports to the United States Continue to Rise
• J-Curve Theory.
• FIGURE 5.11 The U.S. Current-Account Balance Versus the U.S. Dollar: 1970–2010
• FIGURE 5.12 The Theoretical J-Curve
• Devaluation and Inflation.
• U.S. Deficits and the Demand for U.S. Assets.
• Protectionism
• Ending Foreign Ownership of Domestic Assets
• Boosting the Saving Rate
• Mini-Case Yin and Yang of Capital Flow Management
• Adjusting Global Economic Policies
• Current-Account Deficits and Unemployment
• The Bottom Line on Current-Account Deficits and Surpluses
• 5.4 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• 6 Country Risk
• LEARNING OBJECTIVES
• 6.1 Measuring Political Risk
• Application Overseas Risks Faced by Convergys
• Political Stability
• Economic Factors
• Subjective Factors
• Application Threats to the Nation-State
• FIGURE 6.1 Ease of Doing Business Rankings 2013
• Political Risk and Uncertain Property Rights.
• Application Komineft Rhymes with Theft
• Capital Flight.
• Application Mr. Yampel Gets Trampled in Ukraine
• Application Political Risk in Venezuela
• FIGURE 6.2 Venezuela’s Per Capita GDP Falls Under Hugo Chavez
• Application Is Russia Too Corrupt for Foreign Investors?
• FIGURE 6.3 Capital Flight from India 1971–1997
• FIGURE 6.4 Private Capital Returns to Latin America
• Culture.
• 6.2 Economic and Political Factors Underlying Country Risk
• Fiscal Irresponsibility
• Application Japan as Number One in Fiscal Irresponsibility
• FIGURE 6.5A Gross Government Debt as a Percentage of GDP: 1992, 2001, and 2011
• FIGURE 6.5B Japanese Economic Performance Over the Lost Decade: 1992–2001
• FIGURE 6.5C Japan’s Lost Decade Turns Into a Lost Generation
• Monetary Instability
• Mini-Case Zimbabwe Descends into Chaos
• Controlled Exchange Rate System
• Wasteful Government Spending
• Resource Base
• Country Risk and Adjustment to External Shocks
• Market-Oriented Versus Statist Policies
• Why Capitalism Works.
• FIGURE 6.6A Economic Freedom and GDP per Capita
• FIGURE 6.6B Economic Freedom and Prosperity
• Statist Policies Constrain Growth.
• Application India Reforms and Reaps the Benefits
• Application The China Express Derails
• Why Statist Policies Persist.
• Application Lack of Growth in Hungary
• Key Indicators of Country Risk and Economic Health
• Application The 1948 West German Erhard Reforms
• Market-Oriented Policies Work.
• Market-Oriented Reform in Latin America.
• FIGURE 6.7 Mexico’s Economic Policies: Then and Now
• Application The Potential Gains from Privatization
• FIGURE 6.8 Indian Government Ownership Hurts Productivity
• Obstacles to Economic Reform.
• Application Strategies for Eastern European Economic Success
• 6.3 Country Risk Analysis in International Lending
• The Mathematics of Sovereign Debt Analysis
• Application Spain’s Hard Budget Arithmetic
• Application France Loses Its AAA Rating
• Country Risk and the Terms of Trade
• The Government’s Cost/Benefit Calculus
• Application Swine Flu
• FIGURE 6.9 PIIGS in Trouble
• Lessons from the International Debt Crisis
• Onset of the Crisis.
• Reform Takes Hold.
• Debt Relief.
• The Crisis Ends.
• Lessons from Successful Economic Reform.
• 6.4 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• PART 2 Currency and Derivatives Markets
• 7 Currency Markets
• LEARNING OBJECTIVES
• 7.1 Organization of the Foreign Exchange Market
• FIGURE 7.1 The Circadian Rhythms of the Foreign Exchange Market
• The Participants
• FIGURE 7.2 Leading Foreign Exchange Traders in 2012
• FIGURE 7.3 Structure of Foreign Exchange Markets
• The Clearing System.
• Electronic Trading.
• Size
• FIGURE 7.4A Daily Foreign Exchange Trading Volume by Financial Center
• FIGURE 7.4B Daily Global Foreign Exchange Trading Volume
• 7.2 The Spot Market
• Spot Quotations
• FIGURE 7.5 Foreign Exchange Rates Wednesday, December 4, 2013
• Transaction Costs.
• Application Banks Battle Pension Funds over Foreign Exchange Pricing
• Cross Rates.
• FIGURE 7.6 Key Currency Cross Rates Wednesday, December 4, 2013
• Application Calculating the Direct Quote for the Brazilian Real in Bangkok
• Currency Arbitrage.
• FIGURE 7.7 An Example of Triangular Currency Arbitrage
• Mini-Case Arbitraging Currency Cross Rates
• Settlement Date.
• Exchange Risk.
• The Mechanics of Spot Transactions
• 7.3 The Forward Market
• FIGURE 7.8 Hedging a Future Payment with a Forward Contract
• Forward Quotations
• Exchange Risk.
• Cross Rates.
• Application Arbitraging Between Currencies and Interest Rates
• Forward Contract Maturities
• 7.4 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 8 Currency Derivatives
• LEARNING OBJECTIVES
• 8.1 Futures Contracts
• FIGURE 8.1 Contract Specifications for Foreign Currency Futures*
• FIGURE 8.2 Currency Futures Contracts Available at Different Exchanges
• Forward Contract versus Futures Contract
• FIGURE 8.3 An Example of Daily Settlement with a Futures Contract
• FIGURE 8.4 Basic Differences between Forward and Futures Contracts
• Advantages and Disadvantages of Futures Contracts.
• Application Computing Gains, Losses, and Performance Bond Calls on a Futures Contract
• Arbitrage between the Futures and Forward Markets.
• Application Forward-Futures Arbitrage
• 8.2 Currency Options
• Market Structure
• FIGURE 8.5 Contract Specifications for CME Standardized Currency Option Contracts
• Using Currency Options
• FIGURE 8.6 Profit from Buying a Call Option for Various Spot Prices at Expiration
• FIGURE 8.7 Profit from Selling a Call Option for Various Spot Prices at Expiration
• FIGURE 8.8 Profit from Buying a Put Option for Various Spot Prices at Expiration
• FIGURE 8.9 Profit from Selling a Put Option for Various Spot Prices at Expiration
• Application Speculating with a Japanese Yen Call Option
• Currency Spread.
• FIGURE 8.10 Currency Spreads
• Knockout Options.
• Option Pricing and Valuation
• FIGURE 8.11 The Value of a Call Option before Maturity
• FIGURE 8.12 Currency Option Pricing and Valuation
• Using Forward or Futures Contracts Versus Options Contracts
• FIGURE 8.13 Declining Exchange Rate Scenario
• FIGURE 8.14 Hedging Alternatives: Offsetting a $4,750 Loss Due to a Declining Euro
• FIGURE 8.15 Rising Exchange Rate Scenario
• FIGURE 8.16 Hedging Alternatives: Offsetting a $5,200 Gain Due to a Rising Euro
• Application BioCytex Assesses Its Hedging Options
• Mini-Case Carrier Lumber Evaluates Its Futures
• Futures Options
• Application Exercising a British Pounds Call Futures Option Contract
• Application Exercising a Swiss Franc Put Futures Option Contract
• 8.3 Reading Currency Futures and Options Prices
• FIGURE 8.17 Currency Futures and Options Contracts
• FIGURE 8.18 How to Read Futures and Futures Options Quotations
• 8.4 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• APPENDIX 8A Option Pricing Using Black-Scholes
• Application Pricing a Six-Month Swiss Franc European Call Option
• Implied Volatilities
• Shortcomings of the Black-Scholes Option Pricing Model
• PROBLEMS
• APPENDIX 8B Put-Call Option Interest Rate Parity
• FIGURE 8B.1 Illustration of Put-Call Option Interest Rate Parity
• Application Pricing a December Euro Call Option
• PROBLEMS
• 9 Interest Rate Derivatives
• LEARNING OBJECTIVES
• 9.1 Interest Rate and Currency Swaps
• Interest Rate Swaps
• The Classic Swap Transaction.
• FIGURE 9.1 Classic Swap Structure
• Cost Savings Associated with Swaps.
• Application Payments on a Two-Year Fixed-for-Floating Interest Rate Swap
• FIGURE 9.2 Swap Payments Over the Two-Year Life of Thales’ Swap
• Currency Swaps
• FIGURE 9.3 Diagram of a Fixed-For-Fixed Currency Swap
• Interest Rate/Currency Swaps.
• Application Dow Chemical Swaps Fixed-for-Fixed with Michelin
• FIGURE 9.4 Example of a Fixed-For-Fixed Euro–U.S. Dollar Currency Swap
• Application Dow Chemical Swaps Fixed-for-Floating with Michelin
• FIGURE 9.5 Example of a Fixed-For-Floating Currency Swap
• Application Kodak’s Zero-Coupon Australian Dollar Interest Rate/Currency Swap
• FIGURE 9.6 Kodak’s A$200 Million Zero-Coupon Eurobond And Currency Swap
• FIGURE 9.7 MLCS Cash Flows–Eastman Kodak Transaction
• Dual Currency Bond Swaps.
• FIGURE 9.8 Cash Flows Associated with Yen Debenture Currency Swap
• Economic Advantages of Swaps
• 9.2 Interest Rate Forwards and Futures
• Forward Forwards
• Application Telecom Argentina Fixes a Future Loan Rate
• Forward Rate Agreement
• Application Unilever Uses an FRA to Fix the Interest Rate on a Future Loan
• Short-Term Interest Rate Futures
• Application Using a Futures Contract to Hedge a Forward Borrowing Rate
• 9.3 Structured Notes
• Inverse Floaters
• Callable Step-Up Note
• Step-Down Coupon Note
• 9.4 Credit Default Swaps
• 9.5 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• PART 3 Managing Currency Risks
• 10 Translation and Transaction Exposure
• LEARNING OBJECTIVES
• 10.1 Alternative Measures of Foreign Exchange Exposure
• FIGURE 10.1 Comparison of Translation, Transaction, and Operating Exposures
• Translation Exposure
• Transaction Exposure
• Operating Exposure
• 10.2 Alternative Currency Translation Methods
• Current/Noncurrent Method
• Monetary/Nonmonetary Method
• Temporal Method
• Current Rate Method
• FIGURE 10.2 Financial Statement Impact of Translation Alternatives (€ Thousands)
• 10.3 Transaction Exposure
• Application Computing Transaction Exposure for Airbus
• 10.4 Designing a Hedging Strategy
• Objectives
• Application Malaysia Gets Mauled by the Currency Markets
• Costs and Benefits of Standard Hedging Techniques
• FIGURE 10.3 Basic Hedging Techniques
• Costs of Hedging.
• FIGURE 10.4 Cost of the Basic Hedging Techniques
• Benefits of Hedging.
• Application Selective Hedging
• Exposure Netting.
• Centralization versus Decentralization
• Managing Risk Management
• Application The Luck of the Irish Eludes Allied Irish Banks
• Accounting for Hedging under IFRS
• Empirical Evidence on Hedging
• 10.5 Managing Translation Exposure
• FIGURE 10.5 Basic Strategy for Hedging Translation Exposure
• Funds Adjustment
• Evaluating Alternative Hedging Mechanisms
• 10.6 Managing Transaction Exposure
• Forward Market Hedge
• FIGURE 10.6 Possible Outcomes of Forward Market Hedge as of December 31
• The True Cost of Hedging.
• Money Market Hedge
• FIGURE 10.7 Possible Outcomes of Money Market Hedge as of December 31
• Application Comparing Hedging Alternatives When There Are Transaction Costs
• Application Saudi Aramco Hedges Its Exposure
• Risk Shifting
• Pricing Decisions
• Exposure Netting
• Application Using Exposure Netting to Manage Transaction Exposure
• Currency Risk Sharing
• FIGURE 10.8 Currency Risk Sharing: Rowad National Plastics Co. and BASF
• Mini-Case Chrysler Shares Its Currency Risk with Mitsubishi
• Currency Collars
• FIGURE 10.9 Currency Range Forward: Rowad National Plastics Co. and BASF
• FIGURE 10.10 Use of a Currency Cylinder to Hedge RNP’s Receivable
• Cross-Hedging
• Application Hedging a Danish Krone Exposure Using Euro Futures
• Foreign Currency Options
• Using Options to Hedge Bids.
• Using Options to Hedge Other Currency Risks.
• Options versus Forward Contracts.
• Mini-Case Help Esprit Cover Up Its Mexican Peso Transaction Exposure
• 10.7 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• APPENDIX 10A Currency Translation in Practice
• FIGURE 10A.1 Translation of Sterling Ltd.’s Income Statement under IFRS (Millions)
• FIGURE 10A.2 Translation of Sterling Ltd.’s Statement of Financial Position (Millions)
• 11 Economic Exposure
• LEARNING OBJECTIVES
• 11.1 Foreign Exchange Risk and Economic Exposure
• Application European Manufacturers Suffer When the Euro Soars
• FIGURE 11.1 The Time Pattern of Economic Exposure
• Real Exchange Rate Changes and Exchange Risk
• Application Japanese Yen Appreciation or Depreciation?
• Importance of the Real Exchange Rate
• Inflation and Exchange Risk
• Application Calculating the Effects of Exchange Rate Changes and Inflation on Siemens Philippines
• FIGURE 11.2 The Effects of Nominal Exchange Rate Changes and Inflation on Siemens Philippines
• Competitive Effects of Real Exchange Rate Changes
• Application Yen Appreciation Harms Japanese TV Producers
• FIGURE 11.3 The Effects of Real Exchange Rate Changes on the Brazilian Shoe Manufacturer
• 11.2 The Economic Consequences of Exchange Rate Changes
• Transaction Exposure
• Operating Exposure
• Mini-Case Euro Appreciation Hurts Southern European Exports
• FIGURE 11.4 Characteristic Economic Effects of Exchange Rate Changes on International Corporations
• Mini-Case How Rising Gold Prices Hurt Harmony
• 11.3 Identifying Economic Exposure
• Pla Seau Beach Resort
• FIGURE 11.5 Performance of Rupee, Ringgit, and Baht Against U.S. Dollar, 2011 to 2014
• Petróleos Mexicanos
• Toyota Motor Company
• FIGURE 11.6 Key Questions to Ask that Help Identify Exchange Risk
• 11.4 Calculating Economic Exposure
• FIGURE 11.7 Summary of Projected Operations for Spectrum Manufacturing AB: Base Case
• Spectrum’s Accounting Exposure
• FIGURE 11.8 Impact of Krona Devaluation on Spectrum AB’s Financial Statement
• Spectrum’s Economic Exposure
• Scenario 1: All Variables Remain the Same.
• Scenario 2: Krona Sales Prices and All Costs Rise; Volume Remains the Same.
• FIGURE 11.9 Summary of Projected Operations for Spectrum Manufacturing AB: Scenario 2
• Scenario 3: Partial Increases in Prices, Costs, and Volume.
• FIGURE 11.10 Summary of Projected Operations for Spectrum Manufacturing AB: Scenario 3
• Case Analysis.
• FIGURE 11.11 Summary of Economic Exposure Impact of Krona Devaluation on Spectrum Manufacturing AB
• 11.5 An Operational Measure of Exchange Risk
• Limitations
• Empirical Results.
• 11.6 Managing Operating Exposure
• Marketing Management of Exchange Risk
• Market Selection.
• Pricing Strategy.
• Product Strategy.
• Application Hitachi Chemical Moves Overseas
• Production Management of Exchange Risk
• Input Mix.
• Application Japanese Car Manufacturers Outsource to Cope with a Rising Yen
• Shifting Production Among Plants.
• Plant Location.
• Raising Productivity.
• Planning for Exchange Rate Changes
• Application Japanese Car Manufacturers Follow Different Paths to Profitability
• Financial Management of Exchange Risk
• Mini-Case Porsche Revs Up Its Results
• FIGURE 11.12 Statement of Projected Cash Flow
• FIGURE 11.13 Effect of Financial Structure on Net Cash Flow
• Application South Korean Companies and Banks Mismatch Their Currencies
• Application Avon Is Calling in Asia
• 11.7 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• PART 4 Financing International Operations
• 12 International and Domestic Capital Markets
• LEARNING OBJECTIVES
• 12.1 Corporate Sources and Uses of Funds
• Financial Markets versus Financial Intermediaries
• Financial Systems and Corporate Governance
• Globalization of Financial Markets
• Financial Regulation and Deregulation.
• Application Capital Markets Compete for Business
• Application The Basel Rules and Financial Shocks
• Financial Innovation.
• Application The Swedish Export Credit Corporation Innovates
• FIGURE 12.1 Securitization Versus Intermediation
• 12.2 Domestic Capital Markets as International Financial Centers
• FIGURE 12.2 The Role and Consequences of Well-Functioning Financial Markets
• Application Japanese Regulators Press Shinsei Bank to Make Bad Loans
• Mini-Case Beijing Tries to Overhaul Banks Through IPOs
• International Financial Markets
• Foreign Access to Domestic Markets
• The Foreign Bond Market.
• The Foreign Bank Market.
• The Foreign Equity Market.
• FIGURE 12.3 The International Equity offering by Deutsche Telekom
• Application Waste Management Lists Its Stock in Australia
• Globalization of Financial Markets Has Its Downside
• 12.3 Development Banks
• The World Bank Group
• IBRD.
• IFC.
• IDA.
• Regional and National Development Banks
• Regional Development Banks
• National Development Banks.
• Private Sector Alternatives
• FIGURE 12.4 Investment in Infrastructure Projects with Private Participation in Developing Countries (Billions of U.S. Dollars)
• 12.4 Project Finance
• FIGURE 12.5 Project Finance Expertise and Risk Sharing
• 12.5 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 13 International Financial Markets
• LEARNING OBJECTIVES
• 13.1 The Eurocurrency Market
• Modern Origins
• Eurodollar Creation
• Eurocurrency Loans
• Terms.
• Application Calculating the Effective Annual Cost of a Eurocurrency Loan
• Mini-Case Siemens Negotiates a Eurocurrency Loan
• Multicurrency Clauses.
• Relationship Between Domestic and Eurocurrency Money Markets
• Interest Differentials.
• Eurocurrency Spreads.
• FIGURE 13.1 Interest Rate Relationships Between Domestic And Eurocurrency Credit Markets
• Euromarket Trends
• 13.2 Eurobonds
• FIGURE 13.2 Example of Offering Memorandum
• To be confirmed Swaps
• Links Between the Domestic and Eurobond Markets
• Placement.
• Currency Denomination.
• Interest Rates on Fixed-Rate Eurobonds.
• FIGURE 13.3 Comparison of All-In Costs of a Eurobond Issue and a U.S. Dollar Domestic Bond Issue
• Interest Rates on Floating-Rate Eurobonds.
• Eurobond Retirement.
• Ratings.
• Rationale for Existence of Eurobond Market
• Eurobonds versus Eurocurrency Loans
• 13.3 Note Issuance Facilities and Euronotes
• Note Issuance Facilities versus Eurobonds
• Euro-Medium-Term Notes
• Reasons for Success.
• Costs of a Euro-MTN Program.
• Characteristics.
• Risks.
• 13.4 Euro-Commercial Paper
• 13.5 The Asiacurrency Market
• Application Steady Safe Isn’t
• 13.6 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 14 The International Cost of Capital
• LEARNING OBJECTIVES
• 14.1 The Cost of Equity Capital
• 14.2 The Weighted Average Cost of Capital for Foreign Projects
• Application Estimating the Weighted Average Cost of Capital
• Application Estimating a Foreign Project’s Weighted Average Cost of Capital
• 14.3 Discount Rates for Foreign Investments
• Evidence From the Stock Market
• Key Issues in Estimating Foreign Project Discount Rates
• Proxy Companies
• Local Companies.
• Proxy Industry.
• Adjusted U.S. Industry Beta.
• The Relevant Base Portfolio
• The Impact of Globalization on the Cost of Capital.
• Application How Globalization Affected Nestlé’s Cost of Capital
• Empirical Evidence.
• A Recommendation.
• The Relevant Market Risk Premium
• Recommendations
• 14.4 The Cost of Debt Capital
• Annual Exchange Rate Change
• Using Sovereign Risk Spreads
• FIGURE 14.1 Average Sovereign Bond Spreads of New Issues by Developing Countries (20 Countries with Highest and Lowest Bond Spreads)
• 14.5 Establishing a Worldwide Capital Structure
• Foreign Subsidiary Capital Structure
• FIGURE 14.2 Subsidiary Capital Structure: Debt-to-Equity Ratios
• FIGURE 14.3 Consolidated Parent Balance Sheet: Debt-to-Equity Ratios
• FIGURE 14.4 Subsidiary Capital Structure Depends on What Its Funds are Called
• Political Risk Management.
• Currency Risk Management.
• Leverage and Foreign Tax Credits.
• Leasing and Taxes.
• Cost-Minimizing Approach to Global Capital Structure.
• Joint Ventures
• 14.6 Valuing Low-Cost Financing Opportunities
• FIGURE 14.5 Calculating the Value of Nordic Exploration’s Low-cost Loan Arrangement (US$Millions)
• Taxes
• Zero-Coupon Bonds.
• Debt versus Equity Financing.
• Government Credit and Capital Controls
• Government Subsidies and Incentives
• Application Internationalizing the Cost of Capital of Novo Industri
• FIGURE 14.6 Novo’s B Share Prices Compared with Stock Market Indices, 1977–1982
• 14.7 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• PART 5 International Capital Budgeting
• 15 International Portfolio Investment
• LEARNING OBJECTIVES
• 15.1 The Risks and Benefits of International Equity Investing
• International Diversification
• FIGURE 15.1 Annualized Monthly Returns and Standard Deviation of Returns, 1988–2012
• Correlations and the Gains from Diversification.
• FIGURE 15.2 How Foreign Markets Were Correlated with the World Index and the U.S. Market, 1970–2012
• FIGURE 15.3 The Potential Gains from International Diversification
• FIGURE 15.4 The U.S. Market Lags Behind the EAFE Index, 1970–2012
• FIGURE 15.5 International Diversification Pushes Out the Efficient Frontier
• Recent Correlations.
• FIGURE 15.6 Correlation of Monthly Returns with the U.S. Market and Developed Country Markets
• FIGURE 15.7 Correlation of U.S. and EAFE Returns (rolling 5-year periods using monthly data from January 1970 to June 2012)
• FIGURE 15.8 No Place to Hide
• FIGURE 15.9 Risk and Return for Various Mixes of U.S. and EAFE Indices, 1970–2012
• Investing in Emerging Markets
• FIGURE 15.10 Risk and Return for Emerging Markets, 1988–2012
• FIGURE 15.11 Correlation of Monthly Returns with the U.S. Market and Emerging Markets
• FIGURE 15.12 Correlation of U.S. and Emerging Market Returns (rolling 5-year periods using monthly data from January 1989 through June 2012)
• FIGURE 15.13 Risk and Return for Various Mixes of MSCI-World and Emerging Market Indices, 1989–2012
• Application When Latin American Stocks Were Hotter Than Salsa
• FIGURE 15.14 Latin American Stock Markets Take Off on a Bumpy Ride
• Barriers to International Diversification
• Mini-Case Deutsche Bank Lists as a Global Share
• 15.2 International Bond Investing
• 15.3 Optimal International Asset Allocation
• FIGURE 15.15 Efficient Frontiers, 1989 to 2009
• 15.4 Measuring the Total Return from Foreign Portfolio Investing
• Bonds
• Stocks
• 15.5 Measuring Exchange Risk on Foreign Securities
• Hedging Currency Risk
• 15.6 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 16 Strategies for Foreign Direct Investment
• LEARNING OBJECTIVES
• 16.1 Theory of the Multinational Corporation
• Product and Factor Market Imperfections
• Financial Market Imperfections
• 16.2 The Strategy of Multinational Enterprise
• Innovation-Based Multinationals
• The Mature Multinationals
• FIGURE 16.1 Planned Capital Investments for Soda Production and Bottling in Emerging Markets Announced by PepsiCo and Coca-Cola in 1992 and 1993 (US$ Millions)
• Application Fiat’s Strategic Dilemma
• The Senescent Multinationals
• Foreign Direct Investment and Survival
• Application Japan’s Electronics Industry Loses Its Spark
• Cost Reduction.
• Economies of Scale.
• Multiple Sourcing.
• Knowledge Seeking.
• Keeping Domestic Customers.
• Application Bridgestone Buys Firestone
• 16.3 Designing a Global Expansion Strategy
• Awareness of Profitable Investments
• Selecting a Mode of Entry
• Auditing the Effectiveness of Entry Modes
• Using Appropriate Evaluation Criteria
• Estimating the Longevity of a Competitive Advantage
• 16.4 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• INTERNET EXERCISES
• BIBLIOGRAPHY
• 17 International Capital Budgeting
• LEARNING OBJECTIVES
• 17.1 Basics of Capital Budgeting
• Net Present Value
• Incremental Cash Flows
• Cannibalization.
• Sales Creation.
• Opportunity Cost.
• Transfer Pricing.
• Fees and Royalties.
• Getting the Base Case Right.
• Accounting for Intangible Benefits.
• Application Intangible Benefits from Investing in Japan
• Alternative Capital-Budgeting Frameworks
• An Adjusted Present Value Approach.
• Application Estimating a Foreign Project’s Cost of Capital
• 17.2 Issues in Foreign Investment Analysis
• Parent versus Project Cash Flows
• A Three-Stage Approach.
• Estimating Incremental Project Cash Flows.
• Tax Factors.
• Political and Economic Risk Analysis
• Adjusting the Discount Rate or Payback Period.
• Adjusting Expected Values.
• Exchange Rate Changes and Inflation
• Application Factoring in Currency Depreciation and Inflation
• 17.3 Foreign Project Appraisal: The Case of International Machine Tools
• Estimation of Project Cash Flows
• Initial Investment Outlay.
• FIGURE 17.1 Initial Investment Outlay in IMT-U.K. ($2 = £1)
• Financing IMT-U.K.
• FIGURE 17.2 Initial Balance sheet of IMT-U.K. ($2 = £1)
• Interest Subsidies.
• Sales and Revenue Forecasts.
• FIGURE 17.3 Present Value of IMT-U.K.: Project Viewpoint
• Production Cost Estimates.
• Projected Net Income.
• Additions to Working Capital.
• Terminal Value.
• Estimated Project Present Value.
• Estimation of Parent Cash Flows
• Loan Payments.
• Remittances to IMT-TW.
• FIGURE 17.4 Dividends and Fees Royalties Received by IMT-TW (US$ Millions)
• Earnings on Exports to IMT-U.K.
• FIGURE 17.5 Net Cash Flows from Exports to IMT-U.K
• Estimated Present Value of Project to IMT-TW.
• FIGURE 17.6 Present Value of IMT-U.K.: Parent Viewpoint (US$ Millions)
• Lost Sales.
• FIGURE 17.7 Value of Lost Export Sales
• 17.4 Political Risk Analysis
• Expropriation
• Application BanaBay Calculates the Consequences of Expropriation
• FIGURE 17.8 BanaBay’s Choices (€ Millions)
• Blocked Funds
• Application Brascan Calculates the Consequences of Currency Controls
• FIGURE 17.9 Cash Flows to Brascan (C$ Millions)
• 17.5 Growth Options and Project Evaluation
• FIGURE 17.10 The Gold-mine Operating Decision
• FIGURE 17.11 Valuing a Growth Option to Undertake a Follow-Up Project
• 17.6 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• APPENDIX 17A Managing Political Risk
• Pre-investment Planning
• Avoidance
• Insurance
• Negotiating the Environment
• Structuring the Investment
• Operating Policies
• Changing the Benefit/Cost Ratio
• Application Beijing Jeep
• Developing Local Stakeholders
• Adaptation
• PART 6 International Management of Working Capital
• 18 International Trade Management
• LEARNING OBJECTIVES
• 18.1 Payment Terms in International Trade
• Cash in Advance
• Documentary Credit
• FIGURE 18.1 Documentary Credit
• FIGURE 18.2 Relationships Among the Three Parties to a Documentary Credit
• FIGURE 18.3 Example of Documentary Credit Financing of Imports into Nigeria
• Online Alternatives.
• Draft
• FIGURE 18.4 Time Draft
• FIGURE 18.5 Banker’s Acceptance
• Consignment
• Open Account
• FIGURE 18.6 International Methods of Payment: Advantages and Disadvantages (Ranked by Risk)
• Banks and Trade Financing
• Collecting Overdue Accounts
• 18.2 Documents in International Trade
• Bill of Lading
• Commercial Invoice
• Insurance Certificate
• Consular Invoice
• 18.3 Financing Techniques in International Trade
• Bankers’ Acceptances
• Creating an Acceptance.
• FIGURE 18.7 Example of Banker’s Acceptance Financing of Imports: Created, Discounted, Sold, and Paid at Maturity
• Terms of Acceptance Financing.
• Evaluating the Cost of Acceptance Financing
• Discounting
• Factoring
• Evaluating the Cost of Factoring.
• Forfaiting
• 18.4 Government Sources of Export Financing and Credit Insurance
• FIGURE 18.8 Export-Import Agencies
• Export Financing
• FIGURE 18.9 COFACE Country Risk Ratings
• Trends.
• Export-Credit Insurance
• Taking Advantage of Government-Subsidized Export Financing
• Export Financing Strategy.
• Import Financing Strategy.
• FIGURE 18.10 Alternative Sources of Procurement: Hypothetical Copper Mine (US$ Million)
• 18.5 Countertrade
• Application Marc Rich & Co. Recreates the Former Soviet Union’s Supply System
• 18.6 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 19 Managing Working Capital
• LEARNING OBJECTIVES
• 19.1 International Cash Management
• Organization
• Collection and Disbursement of Funds
• FIGURE 19.1 How Multinationals Expedite Their Collection of Receivables
• Application How Firms Coped with the Euro Crisis
• Application International Cash Management at National Semiconductor
• FIGURE 19.2 Reviewing Disbursements: Auditing Payment Instruments
• Payments Netting in International Cash Management
• Bilateral and Multilateral Netting
• FIGURE 19.3A Payment Flows before Multilateral Netting
• Information Requirements.
• FIGURE 19.3B Intercompany Payments Matrix (U.S. € Millions)
• FIGURE 19.3C Payment Flows After Multilateral Netting
• Foreign Exchange Controls.
• Analysis.
• Application Cost/Benefit Analysis of an International Cash Management System
• Management of the Short-Term Investment Portfolio
• FIGURE 19.4 Key Money Market Instruments
• Portfolio Guidelines
• Optimal Worldwide Cash Levels
• Evaluation and Control.
• Cash Planning and Budgeting
• Application An Italian Cash Management System
• Multinational Cash Mobilization.
• FIGURE 19.5 Daily Cash Reports of European Central Cash Pool (US$ Thousands)
• FIGURE 19.6 Aggregate Cash Position of European Central Cash Pool (US$ Thousands)
• FIGURE 19.7 Five-Day Cash Forecast of European Central Cash Pool (US$ Thousands)
• Bank Relations
• 19.2 Accounts Receivable Management
• Credit Extension
• Application Evaluating Credit Extension Overseas
• 19.3 Inventory Management
• Production Location and Inventory Control
• Advance Inventory Purchases
• Inventory Stockpiling
• 19.4 Short-Term Financing
• Key Factors in Short-Term Financing Strategy
• Short-Term Financing Objectives
• Short-Term Financing Options
• Intercompany Financing.
• Local Currency Financing.
• Bank Loans.
• Forms of Bank Credit
• Interest Rates on Bank Loans
• Commercial Paper.
• Calculating the Costs of Alternative Financing Options
• Case 1: No Taxes.
• Analysis
• Case 2: Taxes.
• Analysis
• 19.5 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• 20 Financial Management for the Global Enterprise
• LEARNING OBJECTIVES
• 20.1 The Value of the Multinational Financial System
• FIGURE 20.1 The Multinational Corporate Financial System
• Mode of Transfer
• Timing Flexibility
• Value
• FIGURE 20.2 Market Imperfections that Enhance the Value of Internal Financial Transactions
• 20.2 Intercompany Fund-Flow Mechanisms: Costs and Benefits
• Tax Factors
• Transfer Pricing
• Tax Effects.
• FIGURE 20.3 Tax Effect of High Versus Low Transfer Price (US$ Thousands)
• Tariffs
• FIGURE 20.4 Tax-Plus-Tariff Effect of High Versus Low Transfer Price (US$ Thousands)
• Exchange Controls.
• Joint Ventures.
• Disguising Profitability.
• Evaluation and Control.
• Reinvoicing Centers
• Fees and Royalties
• Application Glaxo Gets an Ulcer from the IRS
• Leading and Lagging
• FIGURE 20.5 Fund-Transfer Effects of Leading and Lagging
• Shifting Liquidity.
• Advantages.
• Government Restrictions.
• Intercompany Loans
• Back-to-Back Loans.
• FIGURE 20.6 Structure of a Back-to-Back Loan
• Parallel Loans.
• FIGURE 20.7 Structure of a Parallel Loan
• Dividends
• Tax Effects.
• FIGURE 20.8 Tax Effects of Dividend Remittances from Abroad
• Financing Requirements.
• Exchange Controls.
• Joint Ventures.
• Equity versus Debt
• FIGURE 20.9 Euro Cash Flows Under Debt and Equity Financing
• FIGURE 20.10 Euro Cash Flows Under Debt and Equity Financing
• 20.3 Designing a Global Remittance Policy
• Prerequisites
• Information Requirements
• Behavioral Consequences
• 20.4 SUMMARY AND CONCLUSIONS
• QUESTIONS
• PROBLEMS
• WEB RESOURCES
• WEB EXERCISES
• BIBLIOGRAPHY
• Back Matter
• Glossary
• Index