BUSINESS FINANCE 725 International Financial Management Syllabus - Spring Quarter 2006 Instructor: Alvaro Taboada Office: 606 Fisher Hall Phone: 292-7562 E- mail: Taboada_1@cob.osu.edu Office Hours: by appointment ________________________________________________________________________ Course Objectives This course applies the principles of investment analysis and financial management to the international arena. The goal is to provide a framework for making sound financial decisions in an international context. The course will be divided into three sections: 1) The international financial environment; 2) international investment analysis, and 3) topics in international corporate finance. We will explore issues in exchange rate risk management, country risk, and cross-border investment analysis, as well as the most recent developments in global financial markets. Text and Materials The required text for this course is International Financial Management (4th edition) by Cheol S. Eun, and Bruce G. Resnick. There is a required course packet that includes HBS Note 9-292-084 “Note on Cross- Border Valuation” and HBS Case 9-204-144 “Offshoring at Global Information Systems, Inc.” The packet is available at COP-Ez. Lecture Notes: available from course web site. Prerequisites BUS ADM 555 and BUS FIN 620 are the formal prerequisites for this course. BUS FIN 722 and 722 are recommended. Students are expected to be familiar with such topics as: discounted cash flows, net present value, basic statistics (mean, standard deviation, regression analysis, etc.). If you do not feel comfortable with these topics, please get yourself up to speed with this material promptly. You should be comfortable using Excel. Grading Grades will be determined as follows: Exams (2): 30% each. Final exam will be cumulative. Homework assignments (2): 5% each Case: 5% Country Report/Presentation: 15% Class participation: 10% Exams There will be one midterm exam and one final exam. The exams will cover material from lectures, assigned readings, and assigned problems. The final exam will be comprehensive. You are allowed to bring a calculator to the exams. I will provide a formula sheet for each exam so that you will not have to memorize formulas. Homework Assignments There will be two homework assignments worth 10% of your grade. The assignments will consist of problem sets and direct applications of the material covered in class. The use of Excel may be needed to complete certain parts of the homework assignments. Country Report and In-Class Presentation Groups of up to five students are required to hand in a professionally written report on a country of their choosing by the beginning of class on Thursday, May 25th . In addition, each group is expected to follow any new develop ments in their selected countries throughout the course of the quarter. Each week I will randomly ask students to discuss recent developments in their chosen countries, emphasizing the potential impact of these developments on international investment. The report should incorporate a detailed study of the economic, political, and financial environment of the respective countries. The report should be typed and should not exceed four pages. The idea is to produce a report that provides an investment recommendation to a multinational corporation that is planning to invest in that country. Each group must be formed and must decide which country they will follow by the end of the third class meeting (April 4th). More information about the report will be discussed in class. In addition to the written assignment, each group will give a 10- minute presentation of their report during the last two weeks of class (May 25th and May 30th ). Case A case study, “Offshoring at Global Information Systems, Inc.” will be discussed during class on May 23rd. Students are required to hand in a written report at the beginning of class on May 23rd. The write-ups should not exceed four pages. Case questions will be posted to the course website. Class Participation/Attendance As much of the learning in this course occurs in the classroom, it is important that all students attend classes. I expect all students to actively participate in class discussions by asking thoughtful questions, sharing their views on particular issues, etc. Just showing up to class will not entitle you to class participation points. You must actively participate in discussions to earn such points. Accommodation Students who request help will be given reasonable accommodation through the advice and assistance of the University Office of Disability Services. Appeals Grading errors should be corrected. Appeals must be in writing, within one week after the graded work is returned. This appeal should include a description of the questions that need to be reexamined as well as an explanation of why the original grade was incorrect. In general, the entire document will be checked for grading errors, and correcting these could result in a higher or lower score. Academic Integrity You have affirmed to adhere to the following statement: As a member of the Fisher College of Business community, I am personally committed to the highest standards of ethical behavior. Honesty and integrity are the foundation from which I will measure my actions. I will hold myself accountable to adhere to these standards. As a leader of the community and business environment, I will pledge to live by these principles and celebrate those who share these ideals. In addition, the University’s Code of Academic Integrity is designed to ensure that the principles of academic honesty and integrity are upheld. All students are expected to adhere to this Code. Please visit the following website for more information on the University’s Code of Academic Integrity and possible sanctions: http://oaa.osu.edu/procedures. In accordance with University Faculty Rule 333-5-487, all instances of academic misconduct will be reported to the Department and the Committee on Academic Misconduct, which recommends appropriate sanctions to the Office of Academic Affairs. Academic misconduct includes, but is not limited to, giving or receiving information during an exam and submitting plagiarized work for academic requirements. Tentative Course Schedule* 3/28/2006 Introduction and course overview Required Reading: Chapter 1 3/30/2006 International Monetary System Required Readings: Chapter 2 Mini Case: Will the UK Join the Euro Club? 4/4/2006 The Foreign Exchange Market Required Reading: Chapter 5 4/6/2006 The Foreign Exchange Market (cont’d) Homework 1 handed out. 4/11/2006 Exchange Rates and International Parity Relations Required Reading: Chapter 6 4/13/2006 Foreign Exchange Options Required Reading: Chapter 7 Mini Case: The Options Speculator 4/18/2006 International Equity Markets Required Reading: Chapter 13 4/20/2006 International Bond Markets and Currency Swaps Required Reading: Chapters 12 & 14 (skip section on interest rate swaps) 4/25/2006 International Portfolio Investment Required Reading: Chapter 15 Homework 1 is due. Mini Case: Solving for the Optimal International Portfolio (in textbook) 4/27/2006 International Banking and the Money Market Required Reading: Chapter 11 5/2/2006 Review Session 5/4/2006 Midterm Exam 5/9/2006 Risk Management and Transaction Exposure to Exchange Rates Required Reading: Chapter 8 Case: Chase Options, Inc. (in textbook) Homework 2 handed out. 5/11/2006 Risk Management of Economic Exposure to Exchange Rates Required Reading: Chapter 9 5/16/2006 International Capital Budgeting Required Reading: Chapter 18; Note on Valuation and Capital Budgeting (HBS 9-292-084) – in course packet. 5/18/2006 Foreign Direct Investment and Political Risk Required Reading: Chapter 16 Mini Case: Enron vs. Bombay Politicians (in textbook) - Homework 2 is due. 5/23/2006 Case: Offshoring and at Global Information Systems Case due at the beginning of class. 5/25/2006 Group Presentations – Country Reports 5/30/2006 Group Presentations – Country Reports 6/1/2006 Review Session Final Exam – as scheduled by the university * Schedule subject to change during the course of the quarter.