FIN 310 Multinational Business Finance

Eiteman, David K., Stonehill, Arthur I., Moffett, Michael H. Multinational Business Finance, 14th Edition 2016, published by Pearson
ISBN-10: 0-13-387987-9
ISBN-13: 978-0-13-387987-2

Students can obtain this text book from the following source:
http://www.mypearsonstore.com/bookstore/multinational-business-finance-9780133879872

All reading and (optional) homework assignments referenced in this syllabus refer to this text

1) In addition, it is recommended that all students have access to MyAccountingLab®, by Pearson. This can be accessed here:
1) https://www.pearsonhighered.com/product/Eiteman-My-Finance-Lab-with-Pearson-e-Text-Instant-Access-for-Multinational-Business-Finance-14th-Edition/9780133918243.html

2) The following study guides will be made available upon enrollment:

Eiteman, David K., Stonehill, Arthur I., Moffett, Michael H. Powerpoint presentation to accompany Multinational Business Finance, 14th Edition 2016, published by Pearson PowerPoint

Lesson Overview

Lesson 1: Multinational Financial Management: Challenges and Opportunities
Read Chapter 1

This lesson explores the basic themes and concepts of Multinational Financial Management. The students look at international exchange rates and interest rates. The students explore the ownership, control, and governance of global business organizations. The students define globalizations and review different currencies and symbols. The students look at assets, institutions and linkages. The students learn the Theory of Comparative Advantage and learn about its limitations. The students define Ganado’s Globalizations and the MNE. The students explore market imperfections and Ganado’s Phases and are introduced to financial globalization.

Lesson 2: The International Monetary System
Read Chapter 2

In this lesson the students learn about the international monetary System. The students learn about at the gold standard and its implications. The students learn about fixed exchange rates and the effects of the Bretton Woods agreement and why it eventually failed. The students learn about the technical float and learn about the advantages and disadvantages of a fixed versus flexible exchange rate. The students look at the effects of a currency board and learn about what would be the ideal currency. The students learn about the Triffin Dilemma and the impossible trinity.

Lesson 3: The Balance of Payments
Read Chapter 3

In this lesson the students define the balance of payments. The students look at BOP data and learn about its importance. The students examine a flow statement and look at its different components. The students differentiate between real and financial assets and direct investments vs. portfolio investments. The students look at financial accounts and learn how to classify transactions. The students learn about capital mobility and J-curve dynamics. The students look at capital controls and look at the effects of globalization on capital mobility.

Lesson 4: Financial Goals and Corporate Governance
Read Chapter 4

In this lesson the students learn about Business ownership and control. The students learn about the separation of ownership and management with respect to agency theory. The students learn about corporate goals such as wealth maximization for shareholders and stakeholders. The students learn about the difference between financial goals and strategic goals in terms of financial returns and dividend returns. The students learn about ownership hybrids and corporate governance. The students learn about how to deal with shareholder dissatisfaction and explore emerging markets and MNEs.

Lesson 5: The Foreign Exchange Market
Read Chapter 5

In this lesson the students learn about the structure and functions of the foreign exchange market. The students look at the market participants in foreign exchange transaction. The students look at the different type of swap transactions and NDFs. The students learn to convert reciprocals and look at base and price currency. The students learn about cross rates and intermarket arbitrage. The students learn to calculate percentage change in exchange rates in both foreign currency terms and home terms.

Lesson 6: International Parity Conditions
Read Chapter 6

In this lesson the students learn about the law of one price. The students learn about purchasing power parity both in its absolute and relative aspects. The students look at the Big Mac Index as a measure of PPP. The students look at undervaluation in the nominal and real effective exchange rate index. the students look at the exchange rate pass-through and the partial exchange rate pass-through. The students learn about the price elasticity of demand and the Fischer effect. The students look at arbitrage and the forward rate. The students learn about the role of transaction costs and carry trade with respect to market efficiency.

Lesson 7: Foreign Currency Futures and Options
Read Chapter 7

In this lesson the students learn about foreign currency futures and its terminology. The students learn about futures and forwards as well as puts and calls. The students distinguish between options and futures and look at premiums prices and costs. The students learn about writing options and decision prices as well as potion cash flows and time. The students look at how to value options in terms of intrinsic value and time value and learn about option deltas and volatility.

Lesson 8: Interest Rate Derivatives and Swaps
Read Chapter 8

In this lesson the students learn about reference rates and the roll of US dollar LIBOR. The students look at credit and repricing risks. The students contrast investment grade with speculative grade. The students look at sovereign debt and floating rate loan risk. The students learn about interest rate futures and foreword rate agreement. The students look at a plain vanilla interest rate swap and different debt structure swap strategies. Finally, the students look at counterparty risk in terms exchange trading in swaps.

Lesson 9: Exchange Rate Determination and Forecasting
Read Chapter 9

In this lesson the students learn how to determine exchange rates using both the purchasing power parity approach, balance of payments approach, and the asset market approach. The students learn about the strengths and weaknesses of each approach and how valuable they are for technical analysis and forecasting. the students learn about foreign currency intervention and its implications and consequences. The students learn about the use of capital controls and the disequilibrium. The students look at exchange rate dynamics and how it affects foreign currency speculation.

Lesson 10: Transaction Exposure
Read Chapter 10

In this lesson the students learn about foreign exchange exposure in terms of transaction exposure. The students look at currency exposure and contracting. The students define currency risk and hedging. The students learn about cash flow variability in terms of currency hedging. The students look at the pros and cons of currency hedging including money market hedges and balance sheet hedging. The students look at option premiums and learn to calculate the hedge ratio.

Lesson 11: Translation Exposure
Read Chapter 11

In this lesson the students define translation exposure and its causes. The students learn about the difference between converting financial assets and translation. The students look at subsidiary characterization and functional currency the students look at different translation methods for assets and liabilities. The students learn about translation exposure management in terms of accounting and cash flow. The students learn about balance sheet hedge justification, realization, and recognition. The students look at tax obligations, hyperinflation and translation losses.

Lesson 12: Operating Exposure
Read Chapter 12

In this lesson the students look at the difference between operating exposure and translation exposure. The students look at the consequences of unexpected exchange rate changes in terms of the time horizon. The students learn about macroeconomic uncertainty and how to manage operating exposure. The students learn about diversification and proactive management. The students explain the ideas of matching currency exposure, risk sharing, and back-to-back loans. The students look a currency swaps and how to hedge the “unhedgeable”.

Lesson 13: The Global Cost and Availability of Capital
Read Chapter 13

In this lesson the students learn about the segmented market and the dimensions of capital. The students learn about the cost of capital benefits and equity cost and risk. The students look at the CAPM beta measurement and equity risk premiums. The students learn about international portfolio management and the dimensions of asset allocation. The students look at market liquidity and market segmentation. The students learn about emerging markets and the cost of capital for MNE’s the students look at multinationals in terms of debt and the use of the CAPM beta.

Lesson 14: Raising Equity and Debt Globally
Read Chapter 14

In this lesson the students learn about equity sourcing strategy and how to find the optimal financial structure. The students look at multinationals and cash flow diversification. The students look at foreign currency denominated debt and global equity alternatives. The students learn about directed public issues and depositary receipts. The students learn about GDRs, ADRs and GRSs and learn about their similarities and differences. The students look at sponsored and unsponsored depositary receipts and different ADR levels. The students learn about IPOs and FOs and foreign equity listing and issuance. The students look at cross listing and private placement. The students learn about bank loans versus securitized debt. The students look at different types of international debt instruments and learn about the advantages and disadvantages of localization. The students also learn about the difference between internal and external financing of foreign subsidiaries.

Lesson 15: Multinational Tax Management
Read Chapter 15

In this lesson the students learn about tax morality and tax neutrality. The students look at direct and indirect tax and learn about tax deferral. the students look at the value-added tax and withholding tax. The students look at tax treaties in terms of active and passive tax types. The students learn about foreign tax credit and earning stripping. The students learn about transfer pricing and fund positioning. The students look at the income tax effect and how to set transfer prices. The students learn about cross-crediting and the check-the-box regulatory change. The students look at tax haven subsidiaries and corporate inversion.

Lesson 16: International Trade Finance
Read Chapter 16

In this lesson the students look at related party trade in terms of affiliated and unaffiliated buyers. The students examine different types of documentation including letters of credit. The students look at different types of letters of credit and the pros and cons of governmentally supplied credit.

Lesson 17: Foreign Direct Investment and Political Risk
Read Chapter 17

In this lesson the students look at market imperfections and multinationalism. The students examine competitive advantage and the economies of scale and scope. The students learn about the OLI and learn about proactive and reactive strategies related to it. The students look at the FDI from a behavioral approach and from the perspective of international network theory. The students learn about the pros and cons of exporting versus producing abroad. The students learn about licensing and management contracts and look at how Greenfield investment can be more advantageous than acquisition.

Lesson 18: Multinational Capital Budgeting
Read Chapter 18

In this lesson the students look at the theoretical framework of capital budgeting. The students look at project versus parent valuation. The students learn about viewpoint as it relates to NPV, consolidated earnings, and cash flows. The students look at how to calculate the cost of equity. The students learn about real option analysis and cross border mergers and how it relates to contingent currency exposure..

The student’s final grade will be based on a final examination. Examination questions will cover all topics covered in the readings. Students will have two hours to complete the final examination.  Students will be assigned a number grade from 0-100. A letter grade will also be issued in accordance with the following scale:

90-100 – A
80-89 – B
70-79 – C
0-69 – non passing