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ISBN-10 ‏ : ‎ 0134796551
ISBN-13 ‏ : ‎ 978-0134796550
Author: David Eiteman (Author), Arthur Stonehill (Author), Michael Moffett (Author)

Renowned for its authoritative, comprehensive coverage of contemporary international finance, Multinational Business Finance 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 a firm’s value, the authors have embedded real-world mini-cases throughout to apply chapter concepts to the types of situations managers of multinational firms face. The 15th Edition attempts to capture the rapid evolution of our global marketplace, taking a closer look at the types of organizations that permeate the widespread arena, competition and opportunities in emerging markets, and how financial leadership can integrate the strategic and financial challenges that global businesses face today.

Table of Content:

PART ONE Global Financial Environment
Chapter 1 Multinational Financial Management: Opportunities and Challenges
LEARNING OBJECTIVES
1.1 The Global Financial Marketplace
Assets, Institutions, and Linkages
Securities
Institutions
Linkages
The Market for Currencies
Currency Symbols
Exchange Rate Quotations and Terminology
Quotation Conventions
Financial Globalization and Risk
Eurocurrencies and Eurocurrency Interest Rates
Eurocurrencies
Eurocurrency Interest Rates
1.2 The Theory of Comparative Advantage
1.3 What Is Different about International Financial Management?
Market Imperfections: A Rationale for the Existence of the Multinational Firm
Why Do Firms Go Global?
You the Professional and Multinational Financial Management
1.4 The Globalization Process
Global Transition I: Domestic Phase to the International Trade Phase
Global Transition II: The International Trade Phase to the Multinational Phase
The Multinational Enterprise’s Consolidated Financial Results
The Limits to Financial Globalization
Summary Points
Questions
Problems
Internet Exercises
Chapter 2 The International Monetary System
LEARNING OBJECTIVES
2.1 History of the International Monetary System
The Gold Standard (1876–1913)
The Interwar Years and World War II (1914–1944)
Bretton Woods and the International Monetary Fund (1944)
Fixed Exchange Rates (1945–1973)
The Floating Exchange Rates, 1973–1997
The Emerging Era, 1997–Present
IMF Classification of Currency Regimes
Brief Classification History
The IMF’s de facto System
Category 1: Hard Pegs
Category 2: Soft Pegs
Category 3: Floating Arrangements
Category 4: Residual
A Global Eclectic
2.2 Fixed Versus Flexible Exchange Rates
2.3 The Impossible Trinity
2.4 A Single Currency for Europe: The Euro
The Maastricht Treaty and Monetary Union
The European Central Bank (ECB)
The Launch of the Euro
2.5 Emerging Markets and Regime Choices
Currency Boards
Argentina
Dollarization
Ecuador
Currency Regime Choices for Emerging Markets
Exchange Rate Regimes: What Lies Ahead?
Summary Points
Questions
Problems
Internet Exercises
Chapter 3 The Balance of Payments
LEARNING OBJECTIVES
3.1 Fundamentals of BOP Accounting
Defining International Economic Transactions
The BOP as a Flow Statement
BOP Accounting
3.2 The Accounts of the Balance of Payments
The Current Account
The Capital and Financial Accounts
Financial Account
Direct Investment
Portfolio Investment
Other Asset Investment
Net Errors and Omissions and Official Reserves Accounts
Net Errors and Omissions Account
Official Reserves Account
Breaking the Rules: China’s Twin Surpluses
3.3 BOP Impacts on Key Macroeconomic Rates
The BOP and Exchange Rates
Fixed Exchange Rate Countries
Floating Exchange Rate Countries
Managed Floats
The BOP and Interest Rates
The BOP and Inflation Rates
3.4 Trade Balances and Exchange Rates
Trade and Devaluation
The J-Curve Adjustment Path
Trade Balance Adjustment Path: The Equation
3.5 Capital Mobility
Current Account Versus Financial Account Capital Flows
Historical Patterns of Capital Mobility
Classical Gold Standard (1870–1914)
Interwar Years (1923–1938)
Fixed Exchange Rates (1944–1973)
Floating Exchange Rates (1973–1997)
The Emerging Era (1997–Present)
Capital Controls
Globalization of Capital Flows
Summary Points
Questions
Problems
Internet Exercises
Chapter 4 Financial Goals and Corporate Governance
LEARNING OBJECTIVES
4.1 Business Ownership
Types of Ownership
Business Ownership
Separation of Ownership from Management
The Goal of Management
Shareholder Capitalism
Agency Theory
Long-Term Versus Short-Term Value Maximization
Stakeholder Capitalism
Market Efficiency
Risk
Single Versus Multiple Goals
The Scorecard
Operational Goals
Returns to Investors in Publicly Traded Firms
Returns to Owners of Privately Held Firms
Operational Goals for MNEs
Consolidated Profits
Public/Private Hybrids
4.2 Publicly Traded Versus Privately Held: The Global Shift
Listings Measurement
Listing Additions
Delistings
Possible Causes in the Decline of Publicly Traded Shares
4.3 Corporate Governance
The Goal of Corporate Governance
The Structure of Corporate Governance
Board of Directors
Management
Equity Markets
Debt Markets
Auditors and Legal Advisers
Regulators
Comparative Corporate Governance
Financial Market Development
Separation of Management and Ownership
Disclosure and Transparency
Historical Development of the Legal System
Family Ownership and Corporate Governance
Failures in Corporate Governance
Good Governance and Corporate Reputation
Corporate Governance Reform
Sarbanes-Oxley Act
Corporate Responsibility and Sustainability
Summary Points
Questions
Problems
Internet Exercises
PART TWO Foreign Exchange Theory and Markets
Chapter 5 The Foreign Exchange Market
LEARNING OBJECTIVES
5.1 Functions of the Foreign Exchange Market
5.2 Structure of the Foreign Exchange Market
The Global Trading Day
Market Participants—The Players
Bank and Nonbank Dealers
Commercial and Investment Transactors
Speculators and Arbitragers
Central Banks and Treasuries
Foreign Exchange Brokers
Evolution of the Market
The Evolution of FX Trading
1985
1990s
2010
The Three Components of FX Trades
FX Market Manipulation: Fixing the Fix
5.3 Transactions in the Foreign Exchange Market
Spot Transactions
Forward Transactions
Swap Transactions
Spot Against Forward
Forward-Forward Swaps
Nondeliverable Forwards (NDFs)
Size of the Foreign Exchange Market
Geographical Distribution
Currency Composition
5.4 Foreign Exchange Rates and Quotations
Currency Symbols
Exchange Rate Quotes
Market Conventions
European Terms
American Terms
Currency Nicknames
Direct and Indirect Quotations
Bid and Ask Rates
Cross Rates
Intermarket Arbitrage
Forward Quotations
Summary Points
Questions
Problems
Internet Exercises
Chapter 6 International Parity Conditions
LEARNING OBJECTIVES
6.1 Prices and Exchange Rates
Purchasing Power Parity and the Law of One Price
Relative Purchasing Power Parity
Empirical Tests of Purchasing Power Parity
Exchange Rate Indices: Real and Nominal
Exchange Rate Pass-Through
Complete Versus Partial Pass-Through
Price Elasticity of Demand
Pass-Through and Emerging Market Currencies
6.2 Interest Rates and Exchange Rates
The Fisher Effect
The International Fisher Effect
The Forward Rate
Calculation of Forward Premiums
Foreign Currency Terms
Interest Rate Parity (IRP)
Covered Interest Arbitrage (CIA)
Rule of Thumb
Arbitrage Rule of Thumb:
Uncovered Interest Arbitrage (UIA)
Equilibrium Between Interest Rates and Exchange Rates
6.3 Forward Rate as an Unbiased Predictor of the Future Spot Rate
6.4 Prices, Interest Rates, and Exchange Rates in Equilibrium
Summary Points
Questions
Problems
Internet Exercises
Chapter 6 Appendix An Algebraic Primer to International Parity Conditions
The Law of One Price
Purchasing Power Parity
Forward Rates
Covered Interest Arbitrage (CIA) and Interest Rate Parity (IRP)
Fisher Effect
International Fisher Effect
Chapter 7 Foreign Currency Derivatives: Futures and Options
LEARNING OBJECTIVES
7.1 Foreign Currency Futures
Contract Specifications
Using Foreign Currency Futures
Short Positions
Long Positions
Foreign Currency Futures Versus Forward Contracts
7.2 Foreign Currency Options
Option Fundamentals
Foreign Currency Options Markets
Options on the Over-the-Counter Market
Options on Organized Exchanges
Currency Option Quotations and Prices
Buyer of a Call
Writer of a Call
Buyer of a Put
Writer of a Put
7.3 Option Pricing and Valuation
7.4 Currency Option Pricing Sensitivity
Forward Rate Sensitivity
Spot Rate Sensitivity (delta)
Time to Maturity: Value and Deterioration (theta)
Sensitivity to Volatility (lambda)
Historic Volatility
Forward-Looking Volatility
Implied Volatility
Sensitivity to Changing Interest Rate Differentials (rho and phi)
Alternative Strike Prices and Option Premiums
Prudence in Practice
Summary Points
Questions
Problems
Pricing Your Own Options
Internet Exercises
Chapter 7 Appendix Currency Option Pricing Theory
The European Call Option: Numerical Example
Chapter 8 Interest Rate Risk and Swaps
LEARNING OBJECTIVES
8.1 Interest Rate Foundations
Interest Rate Calculations
The Reference Rate: LIBOR
8.2 The Cost of Debt
Credit Ratings and Cost of Funds
Credit Risk and Repricing Risk
Sovereign Debt
Sovereign Spreads
European Sovereign Debt
8.3 Interest Rate Risk
Debt Structures and Strategies
An Illustration: MedStat’s Floating-Rate Loans
8.4 Interest Rate Futures and FRAs
Interest Rate Futures
Forward Rate Agreements
8.5 Interest Rate Swaps
Swap Structures
Illustrative Case: MedStat’s Floating-Rate Debt
Plain-Vanilla Swap Strategies
Debt Structure
Debt Cost
Cross-Currency Swaps
Illustrative Case: MedStat Uses a Cross-Currency Swap
Illustrative Case: MedStat Unwinds a Currency Swap
Counterparty Risk
Summary Points
Questions
Problems
Internet Exercises
Chapter 9 Foreign Exchange Rate Determination and Intervention
LEARNING OBJECTIVES
9.1 Exchange Rate Determination: The Theoretical Thread
Parity Conditions Approach
Balance of Payments Approach
Monetary Approach and Asset Market Approach
Monetary Approach
Asset Market Approach
The Asset Market Approach to Forecasting
9.2 Currency Market Intervention
Motivations for Currency Market Intervention
Intervention Methods
Direct Intervention
Indirect Intervention
Capital Controls
When Foreign Currency Intervention Fails
Turkey 2014
Japan 2010
9.3 Disequilibrium: Exchange Rates in Emerging Markets
The Asian Financial Crisis of 1997
Crisis
Causal Complexities
The Argentine Crisis of 2002
Economic Crisis
Devaluation
9.4 Currency Forecasting in Practice
Technical Analysis
Cross-Rate Consistency in Forecasting
Forecasting: What to Think?
Exchange Rate Dynamics: Making Sense of Market Movements
Summary Points
Questions
Problems
Russo-Swiss Cross—2015
Internet Exercises
PART THREE Foreign Exchange Exposure
Chapter 10 Transaction Exposure
LEARNING OBJECTIVES
10.1 Types of Foreign Exchange Exposure
10.2 Why Hedge?
Hedging Defined
The Pros and Cons of Hedging
Pros
Cons
10.3 Transaction Exposure
Purchasing and Selling
Borrowing and Lending
Other Causes of Transaction Exposure
10.4 Transaction Exposure Management
Ganado’s Transaction Exposure
Unhedged Position
Forward Hedge
Money Market Hedge (Balance Sheet Hedge)
Forward and Money Market Hedges Compared
Options Market Hedge
Hedging Alternatives Compared
Hedging an Account Payable
Remain Unhedged
Forward Market Hedge
Money Market Hedge
Option Hedge
Strategy Choice
10.5 Transaction Exposure Management in Practice
Which Goals
Which Transaction Exposures
What Levels of Exposure Cover
Which Hedging Instruments and Structures
Summary Points
Questions
Problems
Internet Exercises
Chapter 10 Appendix A Complex Option Hedges
The Synthetic Forward
Second-Generation Currency Risk Management Products
Zero-Premium Option Products
The Range Forward or Collar
The Participating Forward
Ratio Spreads
The Average Rate Option
Chapter 10 Appendix B The Optimal Hedge Ratio and Hedge Effectiveness
Hedge Ratio
Hedge Symmetry.
Hedge Effectiveness.
Hedge Timing.
Chapter 11 Translation Exposure
LEARNING OBJECTIVES
11.1 Overview of Translation
Concepts and Definitions
Reporting Currency
Foreign Entity
Distinct and Separable Operation
Functional Currency
Foreign Currency Financial Statements
Remeasurement and Translation
Foreign Currency Measurement (Remeasurement)
Foreign Currency Translation
11.2 Translation Methods
Current Rate Method
Temporal Method
U.S. Translation Procedures
International Translation Practices
11.3 Ganado Corporation’s Translation Exposure
Translation Exposure: Income
Consolidated Sales
Consolidated Earnings
Translation Exposure: Balance Sheet
Current Rate Method
Temporal Method
11.4 Managing Translation Exposure
Subsidiary Earnings
Net Equity Investment
Current Rate Method
Temporal Method
When Is a Balance Sheet Hedge Justified?
An Illustration of Using Swaps to Hedge Translation: McDonald’s
Hoover Hedges
McDonald’s Business Forms
The British Subsidiary and Currency Exposure
Cross-Currency Swap Hedging
Summary Points
Questions
Problems
Internet Exercises
Chapter 12 Operating Exposure
LEARNING OBJECTIVES
12.1 A Multinational’s Operating Exposure
Static Versus Dynamic Operating Exposure
Ganado China
Ganado Germany
Ganado U.S
Operating and Financing Cash Flows
Expected Versus Unexpected Changes in Cash Flow
Measuring Operating Exposure
Short Run
Medium Run: Equilibrium
Medium Run: Disequilibrium
Long Run
12.2 Measuring Operating Exposure: Ganado Germany
The Base Case
Case 1: Depreciation—All Variables Remain Constant
Case 2: Volume Increases—Other Variables Remain Constant
Case 3: Sales Price Increases—Other Variables Remain Constant
Case 4: Price, Cost, and Volume Increases
Other Possibilities
Measurement of Loss
12.3 Strategic Management of Operating Exposure
Diversifying Operations
Diversifying Financing
12.4 Proactive Management of Operating Exposure
Matching Currency Cash Flows
Risk-Sharing Agreements
Back-to-Back or Parallel Loans
Cross-Currency Swaps
Contractual Approaches: Hedging the Unhedgeable
Summary Points
Questions
Problems
Internet Exercises
PART FOUR Financing the Global Firm
Chapter 13 Global Cost and Availability of Capital
LEARNING OBJECTIVES
13.1 Financial Globalization and Strategy
Cost of Capital
Cost of Equity
Cost of Debt
13.2 International Portfolio Theory and Diversification
Portfolio Risk Reduction
Foreign Exchange Risk
International CAPM (ICAPM)
Sample Calculation: Ganado’s Cost of Capital
ICAPM Considerations
Global Betas
Equity Risk Premiums
13.3 The Role of International Portfolio Investors
The Link Between Cost and Availability of Capital
Improving Market Liquidity
Market Segmentation
The Effect of Market Liquidity and Segmentation
Globalization of Securities Markets
13.4 The Cost of Capital for MNEs Compared to Domestic Firms
Availability of Capital
Financial Structure, Systematic Risk, and the Cost of Capital for MNEs
The Paradox: Is the Cost of Capital Higher for MNEs?
13.5 Illustrative Case: Novo Industri A/S (Novo)8
Asymmetric Information
Taxation
Feasible Portfolios
Financial, Foreign Exchange, and Political Risks
The Road to Globalization
Closing the Information Gap
The Biotechnology Boom
Directed Share Issue in the United States
Stock Market Reactions
Effect on Novo’s Weighted Average Cost of Capital
Globalization of Securities Markets
Summary Points
Questions
Problems
Internet Exercises
Chapter 14 Funding the Multinational Firm
LEARNING OBJECTIVES
14.1 Designing a Strategy to Source Capital Globally
Alternative Paths to Globalize the Cost and Availability of Capital
14.2 Optimal Financial Structure
Optimal Financial Structure and the Multinational
Availability of Capital
Diversification of Cash Flows
Foreign Exchange Risk and the Cost of Debt
Expectations of International Portfolio Investors
14.3 Raising Equity Globally
Initial Public Offering (IPO)
Euroequity Issue
Directed Public/Private Issue
14.4 Depositary Receipts
ADR Mechanics
ADR Program Structures
DR Markets Today: Who, What, and Where
The Who
The What
The Where
Global Registered Shares (GRSs)
14.5 Private Placement
SEC Rule 144A
Private Equity Funds
Foreign Equity Listing and Issuance
14.6 Raising Debt Globally
International Debt Instruments
Unique Characteristics of Eurobond Markets
Absence of Regulatory Interference
Less Stringent Disclosure
Favorable Tax Treatment
Ratings
14.7 Financing Foreign Subsidiaries
Internal and External Subsidiary Financing
Host Country Norms and Debt
Foreign Exchange Concerns
Tax Concerns
Subsidiary Financing Over Time
Startup Stage
Growth Stage
Maturing Stage
Summary Points
Questions
Problems
Internet Exercises
Chapter 15 Multinational Tax Management
LEARNING OBJECTIVES
15.1 Tax Principles and Practices
Tax Morality
Tax Neutrality
National Tax Environments
Worldwide Approach
Territorial Approach
Tax Deferral
Tax Treaties
Controlled Foreign Corporations
Tax Types
Direct Taxes
Indirect Taxes
15.2 Multinational Tax Management
Allocation of Debt and Earnings Stripping
Foreign Tax Credits and Deferral
Transfer Pricing
Fund Positioning Effect
Income Tax Effect
Managerial Incentives and Evaluation
Effect on Joint-Venture Partners
Cross-Crediting
Check-the-Box and Hybrid Entities
Tax Havens and International Offshore Financial Centers
Basis Erosion and Profit Shifting (BEPS)
Corporate Inversion
Substantial Business Presence
Merger with a Larger Foreign Firm
Merger with a Smaller Foreign Firm
15.3 Google: An Illustrative Case of Profit Repositioning
15.4 Global Tax Competitiveness
The Digital Economy
Country Tax Competitiveness
Governments and Tax Sources
15.5 U.S. Tax Law Change in 2017
Summary Points
Questions
Problems
Internet Exercises
Chapter 16 International Trade Finance
LEARNING OBJECTIVES
16.1 The Trade Relationship
Benefits of the System
Protection Against Risk of Noncompletion
Protection Against Foreign Exchange Risk
Financing the Trade
Noncompletion Risks
16.2 Key Documents
Letter of Credit (L/C)
Parties to a Letter of Credit (L/C)
Irrevocable Versus Revocable L/C
Confirmed Versus Unconfirmed L/C
Advantages and Disadvantages of L/Cs
Draft
Negotiable Instruments
Types of Drafts
Bankers’ Acceptances
Bill of Lading (B/L)
Documentation in a Typical Trade Transaction
16.3 Government Programs to Help Finance Exports
Export Credit Insurance
Export-Import Bank and Export Financing
16.4 Trade Financing Alternatives
Bankers’ Acceptances
Trade Acceptances
Factoring
Securitization
Bank Credit Lines
Commercial Paper
16.5 Forfaiting
Role of the Forfaiter
A Typical Forfaiting Transaction
Summary Points
Questions
Problems
Internet Exercises
PART FIVE Foreign Investments and Investment Analysis
Chapter 17 Foreign Direct Investment and Political Risk
LEARNING OBJECTIVES
17.1 The Foreign Direct Investment Decision
17.2 Structural Choices for Foreign Market Entry
Selecting Target Markets
The Behavioral Approach to FDI
MNEs in a Network Perspective
Choosing Entry Structures
Exporting Versus Production Abroad
Licensing and Management Contracts
Joint Venture Versus Wholly Owned Subsidiary
Greenfield Investments and Foreign Acquisitions
Strategic Alliances
17.3 Political Risk: Definition and Classification
17.4 Financial Impacts of Political Risk
Category 1: Losses in Operating Profitability
Adverse Regulatory Change
Breach of Contract
Local Content Requirements
Category 2: Transfer and Convertibility Risk
Category 3: Expropriation and Nationalization
Direct Versus Indirect
Compensation
17.5 Political Risk Mitigation
Stakeholder Engagement
Use of Domestic Partners
International Investment Agreements
Gradual Investing
Blocked Funds Management
Dispute Resolution
Political Risk Insurance
Providers
Multinational Use
Summary Points
Questions
Internet Exercises
Chapter 18 Multinational Capital Budgeting and Cross-Border Acquisitions
LEARNING OBJECTIVES
18.1 Complexities of Budgeting for a Foreign Project
Cash Flows
Management Expectations
Project Versus Parent Valuation
18.2 Illustrative Case: Cemex Enters Indonesia2
Overview
Capital Investment
Financing
Revenues
Costs
Project Viewpoint Capital Budget
Parent Viewpoint Capital Budget
Sensitivity Analysis: Project Viewpoint
Political Risk
Foreign Exchange Risk
Other Sensitivity Variables
Sensitivity Analysis: Parent Viewpoint
Adjusting Discount Rates
Adjusting Cash Flows
Shortcomings of Each Method
Repercussions to the Investor
MNE Practices
Portfolio Risk Measurement
18.3 Real Option Analysis
18.4 Project Financing
Separability of the Project from Its Investors
Long-Lived and Capital-Intensive Singular Projects
Cash Flow Predictability from Third-Party Commitments
Finite Projects with Finite Lives
18.5 Cross-Border Mergers and Acquisitions
The Cross-Border Acquisition Process
Stage 1: Identification and Valuation
Stage 2: Completion of the Ownership Change
Stage 3: Post-Acquisition Transition Management
Currency Risks in Cross-Border Acquisitions
Summary Points
Questions
Problems
Internet Exercises
Answers to Selected End-of-Chapter Problems
Chapter 1: Multinational Financial Management: Opportunities and Challenges
Chapter 2: International Monetary System
Chapter 3: The Balance of Payments
Chapter 4: Financial Goals and Corporate Governance
Chapter 5: The Foreign Exchange Market
Chapter 6: International Parity Conditions
Chapter 7: Foreign Currency Derivatives: Futures and Options
Chapter 8: Interest Rate Risk and Swaps
Chapter 9: Foreign Exchange Rate Determination and Intervention
Chapter 10: Transaction Exposure
Chapter 11: Translation Exposure
Chapter 12: Operating Exposure
Chapter 13: Global Cost and Availability of Capital
Chapter 14: Funding the Multinational Firm
Chapter 15: Multinational Tax Management
Chapter 16: International Trade Finance
Chapter 17: Foreign Direct Investment and Political Risk
Chapter 18: Multinational Capital Budgeting and Cross-Border Acquisitions
Glossary
Index