International Financial Management, Abridged Edition

562 Pages·2010·4.74 MB·English

by  Jeff Madura

International
Financial Management
ABRIDGED 10TH EDITION
J E F F M A D U R A
Florida Atlantic University
Australia(cid:129)Brazil(cid:129)Japan(cid:129)Korea(cid:129)Mexico(cid:129)Singapore(cid:129)Spain(cid:129)UnitedKingdom(cid:129)UnitedStates
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Dedicated to Mary
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Brief Contents
PART 1: The International Financial Environment 1
1
Multinational Financial Management: An Overview 3
2
International Flow of Funds 27
3
International Financial Markets 55
4
Exchange Rate Determination 95
5
Currency Derivatives 117
PART 2:Exchange Rate Behavior 169
6
Government Influence on Exchange Rates 171
7
International Arbitrage and Interest Rate Parity 203
8
Relationships among Inflation, Interest Rates, and Exchange Rates 233
PART 3:Exchange Rate Risk Management 271
9
Forecasting Exchange Rates 273
10
Measuring Exposure to Exchange Rate Fluctuations 303
11
Managing Transaction Exposure 333
12
Managing Economic Exposure and Translation Exposure 373
PART 4:Long-Term Asset and Liability Management 395
13
Direct Foreign Investment 397
14
Multinational Capital Budgeting 415
15
International Corporate Governance and Control 451
16
Country Risk Analysis 477
17
Multinational Cost of Capital and Capital Structure
This chapter is made available to you at www.cengage.com/finance/madura.
18
Long-Term Financing
This chapter is made available to you at www.cengage.com/finance/madura.
PART 5:Short-Term Asset and Liability Management 557
19
Financing International Trade
This chapter is made available to you at www.cengage.com/finance/madura.
20
Short-Term Financing
This chapter is made available to you at www.cengage.com/finance/madura.
21
International Cash Management
This chapter is made available to you at www.cengage.com/finance/madura.
Appendix A: Answers to Self-Test Questions, 635
Appendix B: Supplemental Cases
Casesforweb-onlychaptersaremadeavailabletoyouatwww.cengage.com/finance/madura.
Appendix C: Using Excel to Conduct Analysis, 669
v
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vi BriefContents
Appendix D: International Investing Project, 677
Appendix E: Discussion in the Boardroom
Exercisesforweb-onlychaptersaremadeavailabletoyouatwww.cengage.com/finance/madura.
Glossary, 689
Direct Exchange Rates over Time, 699
Index, 703
International Credit Crisis Timeline, 710
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Contents
From the Publisher, xxi
Preface, xxiii
About the Author, xxix
PART 1: The International Financial Environment 1
1:MULTINATIONALFINANCIALMANAGEMENT:ANOVERVIEW 3
Managing theMNC,3
Facing AgencyProblems, 4
Governance: HowSOXImprovedCorporate Governance ofMNCs,5
ManagementStructure ofanMNC,6
WhyFirmsPursueInternational Business, 6
TheoryofComparative Advantage,6
ImperfectMarketsTheory, 8
ProductCycle Theory,8
How FirmsEngageinInternational Business, 8
International Trade,9
Licensing,10
Franchising, 10
Joint Ventures,10
Acquisitions ofExistingOperations, 10
Establishing NewForeign Subsidiaries,11
SummaryofMethods,11
ValuationModelforan MNC,13
Domestic Model,13
Valuing InternationalCash Flows,13
Uncertainty Surrounding an MNC’sCashFlows, 15
Uncertainty ofanMNC’s CostofCapital, 17
Organization oftheText,17
Summary,18
Point Counter-Point: Should anMNCReduceItsEthical Standards toCompete
Internationally? 18
Self-Test, 19
Questionsand Applications, 19
AdvancedQuestions, 20
DiscussionintheBoardroom, 22
RunningYourOwnMNC,22
Blades,Inc.Case:DecisiontoExpand Internationally, 23
SmallBusinessDilemma:Developing aMultinationalSporting
GoodsCorporation, 24
Internet/Excel Exercises,25
References, 25
Term PaperontheInternationalCredit Crisis, 26
vii
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viii Contents
2:INTERNATIONALFLOWOFFUNDS 27
BalanceofPayments, 27
CurrentAccount, 27
CapitalandFinancialAccounts,28
International TradeFlows, 30
Distribution ofU.S.Exports andImports,30
U.S.Balance-of-Trade Trend, 32
International TradeIssues,34
EventsThat IncreasedInternational Trade, 34
TradeFriction, 36
Governance: Managerial DecisionaboutOutsourcing,37
Factors Affecting International TradeFlows, 39
ImpactofInflation, 39
ImpactofNationalIncome, 39
ImpactofGovernment Policies,39
ImpactofExchangeRates, 40
InteractionofFactors, 41
Correcting aBalance-of-Trade Deficit,41
Limitations ofa WeakHome CurrencySolution, 41
International Capital Flows,43
Distribution ofDFIbyU.S.Firms,44
Distribution ofDFIintheUnited States,44
FactorsAffecting DFI,44
FactorsAffecting InternationalPortfolio Investment, 45
ImpactofInternational CapitalFlows, 45
Agencies ThatFacilitate InternationalFlows, 47
InternationalMonetary Fund, 47
WorldBank,48
WorldTrade Organization, 48
InternationalFinancial Corporation, 48
InternationalDevelopment Association, 49
Bankfor International Settlements,49
OECD,49
Regional Development Agencies,49
How TradeAffectsan MNC’sValue,49
Summary,50
PointCounter-Point:ShouldTradeRestrictionsBeUsedtoInfluenceHumanRightsIssues?50
Self-Test, 50
Questionsand Applications,51
AdvancedQuestions, 51
DiscussionintheBoardroom, 51
RunningYourOwnMNC,51
Blades,Inc.Case:Exposure toInternational FlowofFunds,52
SmallBusinessDilemma:IdentifyingFactors ThatWill AffecttheForeign Demandatthe
SportsExports Company,52
Internet/Excel Exercises,53
References, 53
3:INTERNATIONALFINANCIALMARKETS 55
Foreign ExchangeMarket,55
HistoryofForeign Exchange,55
ForeignExchangeTransactions, 56
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