Finance 456 – International Financial Management

							               Finance 456/556 – International Financial Management
                             Portland State University
                         School of Business Administration
                               Winter Quarter, 2010



Instructor : Jim Hunter, MBA
Home Phone : 503 557 1891
Email : jhunter@pdx.edu
Office hours: Mon and Wed, 12PM to 2PM, by appointment, SBA 469

Class Period : Monday/Wednesday
Time: 10:15 – 12:05
Dates: January 4 – March 12
Final Exam : Wednesday, March 17, 10:15 – 12:05

PURPOSE: The primary purpose of the course is to examine and understand the
international aspects of financial management for the multinational business enterprise.
The course builds upon the principles of basic business finance and applies the basic
valuation framework of financial decision making to companies that operate in many
countries. In addition issues regarding currency and interest rate risk management as
well as cross border investing and borrowing are covered.

The financial management function of global firms can be divided into five distinct
segments for ease of understanding the manifold aspects of the subject. Each segment
listed below will be covered in detail.

       1. Environment of International Financial Management
       2. Foreign Exchange and Derivatives Markets
       3. Foreign Exchange Risk Management
       4. Financing the Multinational Corporation
       5. Foreign Investment Analysis
       6. Multinational Working Capital Management

METHOD : The course is conducted through a series of lectures, classwork and end of
chapter problems and handout problems. All of the problems will be discussed in class
the following session and are due at that time. Chapter notes in power point can be found
at my website at the SBA. In addition a Corporate Research Paper that covers most of
the above segments is required.

GRADING :
     Mid term Exam                   30 %
     Final Exam                      40 %
     Corporate Research Paper        30 %
Both exams will be quantitative in nature and be based on the homework problems and
classwork.

The level of class participation will be used to make any borderline decisions.

COURSE POLICIES : Each student is expected to read the assigned materials before
coming to class, attend all lectures, keep up with the topics covered, complete the
assigned work, be responsible for all in-class and email announcements, and take the
scheduled examinations. Homework will be collected but not graded. Failing to
demonstrate honesty and integrity will result in a grade of F for each assignment or
exam in which the dishonesty occurred.

TEXTBOOK : Multinational Financial Management, 9th Edition by Alan C. Shapiro,
published by Wiley

References :

For international economics, see Paul Krugman and Maurice Obstfeld , “International
Economics : Theory and Practice”, 5th edition. Addison Wesley Publishing Company.

For international financial markets, see Richard M. Levich, “International Financial
Markets: Prices and Policies”, 2nd edition (McGraw Hill)

Other suggested readings
       Euromoney                 Asia Money
       The Economist             Business Week
       Wall Street Journal       Asian Wall St. Journal
       Treasury and Risk Management



                          CORPORATE RESEARCH PAPER


A 5 page narrative, plus exhibits, paper is required. At a minimum the questions and
issues below should be covered with particular emphasis on risk management and
offshore borrowing and investing activities. Due date is March 12.


A. What is the company’s Foreign Exchange (FX) Risk Management Policy?

                Is centralized or decentralized?
                     o Head Office, Regional Offices, or Operating Subsidiaries
                What types of exposure are measured and managed?
                     o Translation, Transaction and Economic or Operating Exposure
               How has “Other Comprehensive Income”, an equity account, changed
                  o in recent years?
               What hedging transactions are used for each type of exposure?
                  o Forward Contracts, Futures, Options and Swaps
                  o Cash Flow, Fair Value and Net Investment Hedges
               How long a time frame is used to manage this risk?
                  o One year, several years etc.

B. How does the company use Derivatives for funding, investing, and other price risks?


C. What is the extent of the company’s offshore and Euromarket funding and investing
activities?

As a way of introduction the paper should outline the global reach of the corporation by
detailing the number of overseas subsidiaries, the geographic breakdown of sales, assets
and income, and their involvement in international trade.

The following companies are recommended:

       Ford Motor Co.                Intel
P&G                          Merck        Pfizer
United Technology     GE             Dow Chemical          IBM


                        TEXTBOOK HOMEWORK PROBLEMS

Chapter 2     1 ~ 5 and Exchange Rate Changes
        3     1,4,5
        4     1,3,4,5,7,8,9,11,12,13,and 15
        5     BOP and GDP Connection
        6     3
        7     3,4 and FX Market Questions
        8     Question 5 and Problems 1,4,5 and Futures and Options
        9     1,2,3,5 and Interest Rate and Currency Swaps
       10     1a and b only, 2,4,7,8,9 and Risk Management
       11     1,9
       12     1
       13     1,2,3,4
       14     1,2,3,4,5
       15     1,2,3,4,5,7,8
       16     1,5
       17     1,2,3
       19     2,6,9,10
       20     4