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Multinational Finance, 6th Edition

Book Description

Deep coverage and rigorous examination of international corporate finance

Multinational Finance offers an advanced exploration of international corporate finance concepts and operations. Despite its status as one of the most rigorous texts on the topic, this book remains accessible and readable without sacrificing depth of coverage. Sidebars, key terms, essays, conceptual questions, and problems with solutions help aid in the learning process, while suggested readings and PowerPoint handouts reinforce the material and offer avenues for further exploration. This new sixth edition includes Excel templates that allow students to use real-world tools in a learning environment, and the modular structure facilitates course customization to individual objectives, interests, and preparatory level. The emphasis is on the basics of financial management, but coverage includes unique chapters on treasury management, asset pricing, hedging, options, and portfolio management in addition to traditional finance topics.

International finance is a diverse field with myriad specialties and a vast array of possible interests. This book allows students to view the field through the lens of a financial manager with investment or financial options in more than one country to give them a practical feel for real-world application.

  • Understand the nature and operations of international corporate finance
  • Evaluate opportunities, costs, and risks of multinational operations
  • See beyond the numbers and terminology to the general principles at work
  • Learn the markets, currencies, taxation, capital structure, governance, and more

Comprehensive, adaptable, and rigorously focused, this book gives students a solid foundation in international corporate finance, as well as a sound understanding of the tools and mechanics of the field. Designed for MBA and advanced undergraduate courses, Multinational Finance provides the deep coverage so essential to a solid education in finance.

Table of Contents

  1. Series Page
  2. Title Page
  3. Copyright
  4. Preface
    1. Key Features
    2. Learning Aids for Students
    3. Supplements for Instructors
  5. Acknowledgments
  6. About the Author
  7. Part One: The International Financial Environment
    1. Chapter 1: An Introduction to Multinational Finance
      1. 1.1 The Goals of the Multinational Corporation
      2. 1.2 The Challenges of Multinational Operations
      3. 1.3 The Opportunities of Multinational Operations
      4. 1.4 Financial Management of the Multinational Corporation
      5. 1.5 Summary
      6. Key Terms
      7. Conceptual Questions
    2. Chapter 2: World Trade and the International Monetary System
      1. 2.1 Integration of the World's Markets
      2. 2.2 Balance-of-Payments Statistics
      3. 2.3 Exchange Rate Systems
      4. 2.4 A Brief History of the International Monetary System
      5. 2.5 Summary
      6. Key Terms
      7. Conceptual Questions
      8. Problems
    3. Chapter 3: Foreign Exchange and Eurocurrency Markets
      1. 3.1 Characteristics of Financial Markets
      2. 3.2 The Eurocurrency Market
      3. 3.3 The Foreign Exchange Market
      4. 3.4 Foreign Exchange Rates and Quotations
      5. 3.5 Hedging with Currency Forwards
      6. 3.6 The Empirical Behavior of Exchange Rates
      7. 3.7 Summary
      8. Key Terms
      9. Conceptual Questions
      10. Problems
    4. Chapter 4: The International Parity Conditions and Their Consequences
      1. 4.1 The Law of One Price
      2. 4.2 Exchange Rate Equilibrium
      3. 4.3 Covered Interest Arbitrage and Interest Rate Parity
      4. 4.4 Less Reliable International Parity Conditions
      5. 4.5 The Real Exchange Rate
      6. 4.6 Exchange Rate Forecasting
      7. 4.7 Summary
      8. Key Terms
      9. Conceptual Questions
      10. Problems
      11. Further Reading
    5. Appendix 4A: Continuous Compounding
      1. Continuously Compounded Rates of Return
      2. International Parity Conditions in Continuously Compounded Returns
      3. Real Exchange Rates in Continuously Compounded Returns
      4. Summary
      5. Problems
  8. Part Two: Derivative Securities for Financial Risk Management
    1. Chapter 5: Currency Futures and Futures Markets
      1. 5.1 The Evolution of Futures Markets
      2. 5.2 Futures Contracts
      3. 5.3 Forward versus Futures Market Hedges
      4. 5.4 Hedging with Currency Futures
      5. 5.5 Summary
      6. Key Terms
      7. Conceptual Questions
      8. Problems
    2. Chapter 6: Currency Options and Options Markets
      1. 6.1 What Is an Option?
      2. 6.2 Option Payoff Profiles
      3. 6.3 Currency Option Values Prior to Expiration
      4. 6.4 Hedging with Currency Options
      5. 6.5 Exchange Rate Volatility Revisited
      6. 6.6 Summary
      7. Key Terms
      8. Conceptual Questions
      9. Problems
      10. Further Reading
    3. Appendix 6A: Currency Option Valuation
      1. The Black-Scholes option pricing model
      2. A currency option pricing model
      3. Key Terms
      4. Problems
      5. Further Reading
    4. Chapter 7: Currency Swaps and Swaps Markets
      1. 7.1 The Growth of the Swaps Market
      2. 7.2 Swaps as Portfolios of Forward Contracts
      3. 7.3 Currency Swaps
      4. 7.4 Interest Rate Swaps
      5. 7.5 Other Types of Swaps
      6. 7.6 Hedging the Swap Bank's Exposure to Financial Price Risk
      7. 7.7 Summary
      8. Key Terms
      9. Conceptual Questions
      10. Problems
      11. Advanced
  9. Part Three: Managing the Risks of Multinational Operations
    1. Chapter 8: Multinational Treasury Management
      1. 8.1 Determining Financial Goals and Strategies
      2. 8.2 Managing International Trade
      3. 8.3 Payment Methods and Financing for International Trade
      4. 8.4 Managing Cash Flows
      5. 8.5 Managing Exposures to Currency Risk
      6. 8.6 Summary
      7. Key Terms
      8. Conceptual Questions
      9. Problems
      10. Further Reading
    2. Appendix 8A: The Rationale for Hedging Currency Risk
      1. Key Terms
      2. Conceptual Questions
      3. Problems
      4. Further Reading
    3. Chapter 9: Managing Transaction Exposure to Currency Risk
      1. 9.1 Transaction Exposure to Currency Risk
      2. 9.2 Managing Transaction Exposures Internally
      3. 9.3 Managing Transaction Exposures in the Financial Markets
      4. 9.4 Treasury Management in Practice
      5. 9.5 Summary
      6. Key Terms
      7. Conceptual Questions
      8. Problems
      9. Further Reading
    4. Chapter 10: Managing Operating Exposure to Currency Risk
      1. 10.1 Operating Exposures to Currency Risk
      2. 10.2 The Exposure of Shareholders' Equity
      3. 10.3 Managing Operating Exposures in the Financial Markets
      4. 10.4 Managing Operating Exposures Through Operations
      5. 10.5 Pricing Strategy and the Competitive Environment
      6. 10.6 Summary
      7. Key Terms
      8. Conceptual Questions
      9. Problems
      10. Further Reading
    5. Chapter 11: Managing Translation Exposure and Accounting for Financial Transactions
      1. 11.1 Financial Accounting and Reporting Standards
      2. 11.2 The Current Rate Method of IAS 21 and ASC 830–30
      3. 11.3 Corporate Hedging of Translation Exposure
      4. 11.4 Accounting for Financial Market Instruments
      5. 11.5 Accounting, Disclosure, and Corporate Hedging Activities
      6. 11.6 Summary
      7. Key Terms
      8. Conceptual Questions
      9. Problems
      10. Further Reading
  10. Part Four: Valuation and the Structure of Multinational Operations
    1. Chapter 12: Foreign Market Entry and Country Risk Management
      1. 12.1 Strategic Entry into International Markets
      2. 12.2 Country Risk Assessment
      3. 12.3 Strategies for Managing Country Risk
      4. 12.4 Protecting the Multinational's Competitive Advantages
      5. 12.5 Summary
      6. Key Terms
      7. Conceptual Questions
      8. Problem
      9. Further Reading
    2. Chapter 13: Multinational Capital Budgeting
      1. 13.1 The Algebra of Multinational Capital Budgeting
      2. 13.2 An Example: Wendy's Restaurant in Neverland
      3. 13.3 International Parity Disequilibria
      4. 13.4 Special Circumstances in Cross-Border Investments
      5. 13.5 Summary
      6. Key Terms
      7. Conceptual Questions
      8. Problems
      9. Further Reading
    3. Chapter 14: Multinational Capital Structure and Cost of Capital
      1. 14.1 Capital Structure and the Cost of Capital
      2. 14.2 Valuation of a Foreign Project with the WACC
      3. 14.3 The Cost of Capital on Multinational Operations
      4. 14.4 Sources of Funds for Multinational Operations
      5. 14.5 The International Evidence of Capital Structure
      6. 14.6 Summary
      7. Key Terms
      8. Conceptual Questions
      9. Problems
      10. Further Reading
    4. Chapter 15: Taxes and Multinational Corporate Strategy
      1. 15.1 The Objectives of National Tax Policy
      2. 15.2 Types of Taxation
      3. 15.3 Taxes and Organization Form
      4. 15.4 U.S. Taxation of Foreign-Source Income
      5. 15.5 Transfer Pricing and Tax Planning
      6. 15.6 Taxes and the Location of Foreign Assets and Liabilities
      7. 15.7 Summary
      8. Key Terms
      9. Conceptual Questions
      10. Problems
      11. Further Reading
    5. Chapter 16: Real Options and Cross-Border Investment Strategy
      1. 16.1 Real Options and the Theory and Practice of Investment
      2. 16.2 Market Entry as a Simple Real Option
      3. 16.3 Uncertainty and the Value of the Option to Invest
      4. 16.4 Market Entry as a Compound Real Option
      5. 16.5 The Real Option Approach as Complement to NPV
      6. 16.6 Summary
      7. Key Terms
      8. Conceptual Questions
      9. Problems
      10. Further Reading
    6. Chapter 17: Corporate Governance and the International Market for Corporate Control
      1. 17.1 Corporate Governance
      2. 17.2 The International Market for Corporate Control
      3. 17.3 The International Evidence on Mergers and Acquisitions
      4. 17.4 Summary
      5. Key Terms
      6. Conceptual Questions
      7. Problems
      8. Further Reading
  11. Part Five: International Portfolio Investment and Asset Pricing
    1. Chapter 18: International Capital Markets
      1. 18.1 Domestic and International Capital Markets
      2. 18.2 International Investment Vehicles
      3. 18.3 Cross-Border Financial Statement Analysis
      4. 18.4 Summary
      5. Key Terms
      6. Conceptual Questions
      7. Problems
      8. Further Reading
    2. Chapter 19: International Portfolio Diversification
      1. 19.1 The Algebra of Portfolio Diversification
      2. 19.2 Returns on Foreign Investments
      3. 19.3 The Benefits of International Portfolio Diversification
      4. 19.4 Home Bias
      5. 19.5 Summary
      6. Key Terms
      7. Conceptual Questions
      8. Problems
      9. Further Reading
    3. Chapter 20: International Asset Pricing
      1. 20.1 The International Capital Asset Pricing Model (IAPM)
      2. 20.2 Factor Models of Expected and Required Return
      3. 20.3 Contemporary Asset Pricing Models
      4. 20.4 Summary
      5. Key Terms
      6. Conceptual Questions
      7. Problems
      8. Further Reading
  12. Appendix: Useful Rules and Formulas
    1. Conventions Used in Multinational Finance
    2. Symbols
    3. Rules and Formulas
  13. Glossary
    1. Index
  14. End User License Agreement