Multinational Business Finance, Fifteenth Edition
By David K Eiteman, Arthur I Stonehill and Michael H Moffett
Contents:
PART 1 Global Financial Environment 21
Chapter 1 Multinational Financial Management:
Opportunities and Challenges 22
1.1 The Global Financial Marketplace 23
1.2 The Theory of Comparative Advantage 31
1.3 What Is Different about International Financial Management? 32
1.4 The Globalization Process 35
Summary Points 40
Mini-Case Crowdfunding Kenya 40
Questions ■ Problems ■ Internet Exercises 43
Chapter 2 The International Monetary System 49
2.1 History of the International Monetary System 50
2.2 Fixed Versus Flexible Exchange Rates 59
2.3 The Impossible Trinity 59
2.4 A Single Currency for Europe: The Euro 61
2.5 Emerging Markets and Regime Choices 64
Summary Points 69
Mini-Case The Internationalization (or Not) of the Chinese Renminbi 69
Questions ■ Problems ■ Internet Exercises 72
Chapter 3 The Balance of Payments 77
3.1 Fundamentals of BOP Accounting 78
3.2 The Accounts of the Balance of Payments 80
3.3 BOP Impacts on Key Macroeconomic Rates 88
3.4 Trade Balances and Exchange Rates 90
3.5 Capital Mobility 93
Summary Points 99
Mini-Case Global Remittances 99
Questions ■ Problems ■ Internet Exercises 104
Chapter 4 Financial Goals and Corporate Governance 109
4.1 Business Ownership 110
4.2 Publicly Traded Versus Privately Held: The Global Shift 118
4.3 Corporate Governance 121
Summary Points 129
Mini-Case Volkswagen’s Defeat Devices and Stakeholder Control 130
Questions ■ Problems ■ Internet Exercises 134
PART 2 Foreign Exchange Theory and Markets 139
Chapter 5 The Foreign Exchange Market 140
5.1 Functions of the Foreign Exchange Market 140
5.2 Structure of the Foreign Exchange Market 141
5.3 Transactions in the Foreign Exchange Market 149
5.4 Foreign Exchange Rates and Quotations 155
Summary Points 162
Mini-Case The Venezuelan Bolivar Black Market 163
Questions ■ Problems ■ Internet Exercises 166
Chapter 6 International Parity Conditions 171
6.1 Prices and Exchange Rates 172
6.2 Interest Rates and Exchange Rates 179
6.3 Forward Rate as an Unbiased Predictor of the Future Spot Rate 189
6.4 Prices, Interest Rates, and Exchange Rates in Equilibrium 190
Summary Points 192
Mini-Case Mrs. Watanabe and the Japanese Yen Carry Trade 192
Questions ■ Problems ■ Internet Exercises 195
Appendix: An Algebraic Primer to International Parity Conditions 202
Chapter 7 Foreign Currency Derivatives: Futures and Options 206
7.1 Foreign Currency Futures 207
7.2 Foreign Currency Options 209
7.3 Option Pricing and Valuation 217
7.4 Currency Option Pricing Sensitivity 218
Summary Points 225
Mini-Case KiKos and the South Korean Won 225
Questions ■ Problems ■ Internet Exercises 228
Appendix: Currency Option Pricing Theory 233
Chapter 8 Interest Rate Risk and Swaps 235
8.1 Interest Rate Foundations 236
8.2 The Cost of Debt 239
8.3 Interest Rate Risk 244
8.4 Interest Rate Futures and FRAs 247
8.5 Interest Rate Swaps 248
Summary Points 257
Mini-Case Argentina and the Vulture Funds 257
Questions ■ Problems ■ Internet Exercises 262
Chapter 9 Foreign Exchange Rate Determination and Intervention 268
9.1 Exchange Rate Determination: The Theoretical Thread 269
9.2 Currency Market Intervention 273
9.3 Disequilibrium: Exchange Rates in Emerging Markets 279
9.4 Currency Forecasting in Practice 284
Summary Points 289
Mini-Case Iceland—A Small Country in a Global Crisis 289
Questions ■ Problems ■ Internet Exercises 294
PART 3 Foreign Exchange Exposure 301
Chapter 10 Transaction Exposure 302
10.1 Types of Foreign Exchange Exposure 302
10.2 Why Hedge? 304
10.3 Transaction Exposure 306
10.4 Transaction Exposure Management 308
10.5 Transaction Exposure Management in Practice 317
Summary Points 321
Mini-Case China Noah Corporation 321
Questions ■ Problems ■ Internet Exercises 327
Appendix A: Complex Option Hedges 334
Appendix B: The Optimal Hedge Ratio and Hedge Effectiveness 342
Chapter 11 Translation Exposure 344
11.1 Overview of Translation 345
11.2 Translation Methods 348
11.3 Aidan Corporation’s Translation Exposure 351
11.4 Managing Translation Exposure 356
Summary Points 361
Mini-Case Electrolux of Sweden’s Currency Management 361
Questions ■ Problems ■ Internet Exercises 367
Chapter 12 Operating Exposure 370
12.1 A Multinational’s Operating Exposure 371
12.2 Measuring Operating Exposure: Aidan Turkey 375
12.3 Strategic Management of Operating Exposure 380
12.4 Proactive Management of Operating Exposure 382
Summary Points 388
Mini-Case Brexit and Rolls-Royce 389
Questions ■ Problems ■ Internet Exercises 393
PART 4 Financing the Global Firm 399
Chapter 13 Global Cost and Availability of Capital 400
13.1 Financial Globalization and Strategy 400
13.2 International Portfolio Theory and Diversification 404
13.3 The Role of International Portfolio Investors 410
13.4 The Cost of Capital for MNEs Compared to Domestic Firms 414
13.5 Illustrative Case: Novo Industri A/S (Novo) 418
Summary Points 422
Mini-Case Ferrari’s IPO—The Potential of the Prancing Horse 423
Questions ■ Problems ■ Internet Exercises 431
Chapter 14 Funding the Multinational Firm 437
14.1 Designing a Strategy to Source Capital Globally 438
14.2 Optimal Financial Structure 439
14.3 Raising Equity Globally 442
14.4 Depositary Receipts 445
14.5 Private Placement 450
14.6 Raising Debt Globally 452
14.7 Financing Foreign Subsidiaries 455
Summary Points 459
Mini-Case CEMEX’s Debt Dilemma 460
Questions ■ Problems ■ Internet Exercises 466
Chapter 15 Multinational Tax Management 471
15.1 Tax Principles and Practices 472
15.2 Multinational Tax Management 479
15.3 Google: An Illustrative Case of Profit Repositioning 489
15.4 Global Tax Competitiveness 492
15.5 U.S. Tax Law Change in 2017 494
Summary Points 496
Mini-Case Apple’s Global iTax Strategy 496
Questions ■ Problems ■ Internet Exercises 501
Chapter 16 International Trade Finance 505
16.1 The Trade Relationship 505
16.2 Key Documents 510
16.3 Government Programs to Help Finance Exports 517
16.4 Trade Financing Alternatives 518
16.5 Forfaiting 521
Summary Points 523
Mini-Case Crosswell International and Brazil 524
Questions ■ Problems ■ Internet Exercises 527
PART 5 Foreign Investments and Investment Analysis 531
Chapter 17 Foreign Direct Investment and Political Risk 532
17.1 The Foreign Direct Investment Decision 532
17.2 Structural Choices for Foreign Market Entry 534
17.3 Political Risk: Definition and Classification 539
17.4 Financial Impacts of Political Risk 540
17.5 Political Risk Mitigation 545
Summary Points 551
Mini-Case Tengiz—The Definition of Political Risk 551
Questions ■ Internet Exercises 555
Chapter 18 Multinational Capital Budgeting and
Cross-Border Acquisitions 558
18.1 Complexities of Budgeting for a Foreign Project 559
18.2 Illustrative Case: Cemex Enters Indonesia 562
18.3 Real Option Analysis 574
18.4 Project Financing 575
18.5 Cross-Border Mergers and Acquisitions 576
Summary Points 582
Mini-Case Elan and Royalty Pharma 583
Questions ■ Problems ■ Internet Exercises 587
Answers to Selected End-of-Chapter Problems 592
Glossary 596
Index 614