Instruction Manual for multinational business finance Pearson Series in Finance15th Edition by David Eiteman , Arthur Stonehill , Michael Moffett ISBN 0134796551 978-0134796550

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

For courses in international finance.

Authoritative, comprehensive coverage of contemporary international finance

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.

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multinational business finance (Pearson Series in Finance) 15th Table of contents:

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

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