Multinational Business Finance

by: Eiteman, David K.; Stonehill, Arthur I.; Moffett, Michael H.

ISBN 13:
9780136096689
ISBN 10:
0136096689
Edition: 12th
Format: Hardcover
Copyright: 01/01/2010
Publisher: Prentice Hall
Newer Edition

Note: Not guaranteed to come with supplemental materials (access cards, study guides, lab manuals, CDs, etc.)

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Summary

Renowned for its authoritative, comprehensive coverage of contemporary international finance, this market-leading text trains the leaders of tomorrow's multinational enterprises to recognize and capitalize on the unique characteristics of global markets. Because the job of a manager is to make financial decisions that increase firm value, the authors have embedded real-world mini-cases throughout to apply chapter concepts to the types of situations managers of multinational firms face.

Globalization and the Multinational Enterprise; Financial Goals & Governance; The International Monetary System; The Balance of Payments; Current Multinational Financial Challenges: Crisis; The Foreign Exchange Market

International Parity Conditions; Foreign Currency Derivatives; Interest Rate and Cross Currency Swaps; Foreign Exchange Rate Determination & Forecasting; Transaction Exposure; Operating Exposure; Translation Exposure; The Global Cost and Availability of Capital; Sourcing Equity Globally; Sourcing Debt Globally; International Portfolio Theory & Investment; Foreign Direct Investment Theory & Strategy; Multinational Capital Budgeting; Multinational Tax Management; Working Capital Management; International Trade Finance

MARKET: For the leaders of tomorrow’s multinational enterprises who will recognize and capitalize on the unique characteristics of global markets.

Global Financial Environment	p. 1
Globalization and the Multinational Enterprise	p. 2
Globalization and Creating Value in the Multinational Enterprise	p. 3
The Theory of Comparative Advantage	p. 4
What Is Different about Global Financial Management?	p. 7
Market Imperfections: A Rationale for the Existence of the Multinational Firm	p. 8
The Globalization Process	p. 9
Summary Points	p. 13
Porsche Changes Tack	p. 13
Questions, Problems, Internet Exercises	p. 19
Financial Goals and Corporate Governance	p. 22
Who Owns the Business?	p. 22
What Is the Goal of Management?	p. 24
Corporate Governance	p. 28
Summary Points	p. 40
Governance Failure at Enron	p. 41
Questions, Problems, Internet Exercises	p. 45
The International Monetary System	p. 50
History of the International Monetary System	p. 50
Contemporary Currency Regimes	p. 56
Emerging Markets and Regime Choices	p. 62
The Birth of a European Currency: The Euro	p. 64
Exchange Rate Regimes: What Lies Ahead?	p. 69
Summary Points	p. 70
The Revaluation of the Chinese Yuan	p. 71
Questions, Problems, Internet Exercises	p. 74
The Balance of Payments	p. 78
Typical Balance of Payments Transactions	p. 79
Fundamentals of Balance of Payments Accounting	p. 80
The Accounts of the Balance of Payments	p. 81
The Capital and Financial Accounts	p. 83
The Balance of Payments in Total	p. 88
The Balance of Payments Interaction with Key Macroeconomic Variables	p. 91
Trade Balances and Exchange Rates	p. 93
Capital Mobility	p. 96
Summary Points	p. 99
Turkey's Kriz (A): Deteriorating Balance of Payments	p. 99
Questions, Problems, Internet Exercises	p. 101
Current Multinational Financial Challenges: The Credit Crisis of 2007-2009	p. 106
The Seeds of Crisis: Subprime Debt	p. 106
The Transmission Mechanism: Securitization and Derivatives of Securitized Debt	p. 109
The Fallout: The Crisis of 2007 and 2008	p. 120
The Remedy: Prescriptions for an Infected Global Financial Organism	p. 129
Summary Points	p. 131
Letting Go of Lehaman Brothers	p. 132
Questions, Problems, Internet Exercises	p. 134
Foreign Exchange Theory and Markets	p. 137
The Foreign Exchange Market	p. 138
Geographical Extent of the Foreign Exchange Market	p. 138
Functions of the Foreign Exchange Market	p. 139
Market Participants	p. 140
Transactions in the Interbank Market	p. 142
Foreign Exchange Rates and Quotations	p. 148
Summary Points	p. 156
The Venezuelan Bolivar Black Market	p. 157
Questions, Problems, Internet Exercises	p. 160
International Parity Conditions	p. 164
Prices and Exchange Rates	p. 164
Interest Rates and Exchange Rates	p. 172
Forward Rate as an Unbiased Predictor of the Future Spot Rate	p. 181
Prices, Interest Rates, and Exchange Rates in Equilibrium	p. 183
Summary Points	p. 184
Currency Pass-Through at Porsche	p. 185
Questions, Problems, Internet Exercises	p. 186
An Algebraic Primer to International Parity Conditions	p. 193
Foreign Currency Derivatives	p. 197
Foreign Currency Futures	p. 198
Currency Options	p. 201
Foreign Currency Speculation	p. 203
Option Pricing and Valuation	p. 210
Currency Option Pricing Sensitivity	p. 213
Prudence in Practice	p. 221
Summary Points	p. 222
Warren Buffett's Love-Hate Relationship with Derivatives	p. 223
Questions, Problems, Internet Exercises	p. 226
Currency Option Pricing Theory	p. 230
Interest Rate and Currency Swaps	p. 234
Defining Interest Rate Risk	p. 234
Management of Interest Rate Risk	p. 237
Trident Corporation: Swapping to Fixed Rates	p. 245
Currency Swaps	p. 246
Trident Corporation: Swapping Floating Dollars into Fixed Rate Swiss Francs	p. 247
Counterparty Risk	p. 249
Summary Points	p. 250
McDonald's Corporation's British Pound Exposure	p. 251
Questions, Problems, Internet Exercises	p. 252
Foreign Exchange Rate Determination and Forecasting	p. 256
Exchange Rate Determination: The Theoretical Thread	p. 257
The Asset Market Approach to Forecasting	p. 260
Disequilibrium: Exchange Rates in Emerging Markets	p. 262
Illustrative Case: The Asian Crisis	p. 262
Illustrative Case: The Argentine Crisis of 2002	p. 265
Forecasting in Practice	p. 270
Summary Points	p. 274
JPMorgan Chase's Forecasting Accuracy	p. 274
Questions, Problems, Internet Exercises	p. 276
Foreign Exchange Exposure	p. 281
Transaction Exposure	p. 282
Types of Foreign Exchange Exposure	p. 282
Why Hedge?	p. 284
Measurement of Transaction Exposure	p. 287
Trident's Transaction Exposure	p. 289
Management of an Account Payable	p. 297
Risk Management in Practice	p. 299
Summary Points	p. 300
Xian-Janssen Pharmaceutical (China) and the Euro	p. 301
Questions, Problems, Internet Exercises	p. 303
Complex Options	p. 312
Operating Exposure	p. 320
Attributes of Operating Exposure	p. 320
Illustrating Operating Exposure: Trident	p. 322
Strategic Management of Operating Exposure	p. 326
Proactive Management of Operating Exposure	p. 329
Contractual Approaches: Hedging the Unhedgeable	p. 336
Summary Points	p. 337
Toyota's European Operating Exposure	p. 338
Questions, Problems, Internet Exercises	p. 340
Translation Exposure	p. 344
Overview of Translation	p. 344
Translation Methods	p. 347
Translation Example: Trident Europe	p. 350
Comparing Translation Exposure with Operating Exposure	p. 355
Managing Translation Exposure	p. 355
Summary Points	p. 359
LaJolla Engineering Services	p. 360
Questions, Problems, Internet Exercises	p. 362
Financing the Global Firm	p. 365
The Global Cost and Availability of Captial	p. 366
Weighted Average Cost of Capital	p. 368
The Demand for Foreign Securities: The Role of International Portfolio Investors	p. 373
The Cost of Capital for MNEs Compared to Domestic Firms	p. 379
Solving a Riddle: Is the Weighted Average Cost of Capital for MNEs Really Higher Than for Their Domestic Counterparts?	p. 380
Summary Points	p. 382
Novo Industri A/S (Novo)	p. 383
Questions, Problems, Internet Exercises	p. 387
Sourcing Equity Globally	p. 391
Designing a Strategy to Source Equity Globally	p. 392
Foreign Equity Listing and Issuance	p. 395
Effect of Cross-Listing and Equity Issuance on Share Price	p. 397
Barriers to Cross-Listing and Selling Equity Abroad	p. 399
Alternative Instruments to Source Equity in Global Markets	p. 400
Summary Points	p. 404
Petrobrás of Brazil and the Cost of Capital	p. 404
Questions, Problems, Internet Exercises	p. 408
Sourcing Debt Globally	p. 410
Optimal Financial Structure	p. 410
Optimal Financial Structure and the MNE	p. 411
Financial Structure of Foreign Subsidiaries	p. 414
International Debt Markets	p. 418
Summary Points	p. 424
Tirstrup BioMechanics (Denmark): Raising Dollar Debt	p. 424
Questions, Problems, Internet Exercises	p. 426
Foreign Investment Decisions	p. 431
International Portfolio Theory and Diversification	p. 432
International Diversification and Risk	p. 432
Internationalizing the Domestic Portfolio	p. 435
National Markets and Asset Performance	p. 441
Summary Points	p. 446
Is Modern Portfolio Theory Outdated?	p. 447
Questions, Problems, Internet Exercises	p. 448
Foreign Direct Investment Theory and Political Risk	p. 452
Sustaining and Transferring Competitive Advantage	p. 452
The OLI Paradigm and Internalization	p. 455
Deciding Where to Invest	p. 457
How to Invest Abroad: Modes of Foreign Involvement	p. 458
Foreign Direct Investment Originating in Developing Countries	p. 462
Foreign Direct Investment and Political Risk	p. 464
Assessing Political Risk	p. 465
Firm-Specific Risks	p. 466
Country-Specific Risks: Transfer Risk	p. 469
Country-Specific Risks: Cultural and Institutional Risks	p. 472
Global-Specific Risks	p. 476
Summary Points	p. 479
Mattel's Chinese Sourcing Crisis of 2007	p. 480
Questions, Problems, Internet Exercises	p. 483
Multinational Capital Budgeting	p. 487
Complexities of Budgeting for a Foreign Project	p. 488
Project versus Parent Valuation	p. 489
Illustrative Case: Cemex Enters Indonesia	p. 490
Real Option Analysis	p. 502
Project Financing	p. 503
Summary Points	p. 505
Trident's Chinese Market Entry-An Application of Real Option Analysis	p. 505
Questions, Problems, Internet Exercises	p. 507
Managing Multinational Operations	p. 513
Multinational Tax Management	p. 514
Tax Principles	p. 514
Transfer Pricing	p. 522
Tax Management at Trident	p. 524
Tax Haven Subsidiaries and International Offshore Financial Centers	p. 525
Summary Points	p. 527
Stanley Works and Corporate Inversion	p. 527
Questions, Problems, Internet Exercises	p. 531
Working Capital Management	p. 535
Trident Brazil's Operating Cycle	p. 535
Trident's Repositioning Decisions	p. 537
Constraints on Respositioning Funds	p. 539
Conduits for Moving Funds by Unbundling Them	p. 539
International Dividend Remittances	p. 540
Net Working Capital	p. 542
International Cash Management	p. 548
Financing Working Capital	p. 552
Summary Points	p. 556
Honeywell and Pakistan International Airways	p. 557
Questions, Problems, Internet Exercises	p. 559
International Trade Finance	p. 565
The Trade Relationship	p. 565
The Trade Dilemma	p. 567
Benefits of the System	p. 568
Letter of Credit (L/C)	p. 570
Draft	p. 572
Bill of Lading (B/L)	p. 573
Example: Documentation in a Typical Trade Transaction	p. 574
Government Programs to Help Finance Exports	p. 576
Trade Financing Alternatives	p. 578
Forfaiting: Medium- and Long-Term Financing	p. 580
Summary Points	p. 582
Crosswell International's Precious Ultra-Thin Diapers	p. 583
Questions, Problems, Internet Exercises	p. 587
Answers to Selected Problems	p. 590
Glossary	p. 593
Index	p. 608
Credits	p. 628
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Multinational Business Finance

9780136096689

0136096689

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