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Multinational Finance: Evaluating the Opportunities, Costs, and Risks of Multinational Operations, 6th Edition

Multinational Finance: Evaluating the Opportunities, Costs, and Risks of Multinational Operations, 6th Edition

Kirt C. Butler

ISBN: 978-1-119-21968-2

May 2016

576 pages


Deep coverage and rigorous examination of international corporate finance

Multinational Finance offers an advanced exploration of international corporate finance concepts and operations. Despite its status as one of the most rigorous texts on the topic, this book remains accessible and readable without sacrificing depth of coverage. Sidebars, key terms, essays, conceptual questions, and problems with solutions help aid in the learning process, while suggested readings and PowerPoint handouts reinforce the material and offer avenues for further exploration. This new sixth edition includes Excel templates that allow students to use real-world tools in a learning environment, and the modular structure facilitates course customization to individual objectives, interests, and preparatory level. The emphasis is on the basics of financial management, but coverage includes unique chapters on treasury management, asset pricing, hedging, options, and portfolio management in addition to traditional finance topics.

International finance is a diverse field with myriad specialties and a vast array of possible interests. This book allows students to view the field through the lens of a financial manager with investment or financial options in more than one country to give them a practical feel for real-world application.

  • Understand the nature and operations of international corporate finance
  • Evaluate opportunities, costs, and risks of multinational operations
  • See beyond the numbers and terminology to the general principles at work
  • Learn the markets, currencies, taxation, capital structure, governance, and more

Comprehensive, adaptable, and rigorously focused, this book gives students a solid foundation in international corporate finance, as well as a sound understanding of the tools and mechanics of the field. Designed for MBA and advanced undergraduate courses, Multinational Finance provides the deep coverage so essential to a solid education in finance.

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About the Author

Part One: The International Financial Environment

Chapter 1: An Introduction to Multinational Finance

1.1 The Goals of the Multinational Corporation

1.2 The Challenges of Multinational Operations

1.3 The Opportunities of Multinational Operations

1.4 Financial Management of the Multinational CorporationCORPORATION

1.5 Summary

Chapter 2: World Trade and the International Monetary System

2.1 Integration of the World’s Markets

2.2 Balance-of-Payments Statistics

2.3 Exchange Rate Systems

2.4 A Brief History of the International Monetary System

2.5 Summary

Chapter 3: Foreign Exchange and Eurocurrency Markets

3.1 Characteristics of Financial Markets

3.2 The Eurocurrency Market

3.3 The Foreign Exchange Market

3.4 Foreign Exchange Rates and Quotations

3.5 Hedging with Currency Forwards

3.6 The Empirical Behavior of Exchange Rates

3.7 Summary

Chapter 4: The International Parity Conditions and Their Consequences

4.1 The Law of One Price

4.2 Exchange Rate Equilibrium

4.3 Covered Interest Arbitrage and Interest Rate Parity

4.4 Less Reliable International Parity Conditions

4.5 The Real Exchange Rate

4.6 Exchange Rate Forecasting

4.7 Summary

Appendix 4A: Continuous Compounding

Part Two: Derivative Securities for Financial Risk Management

Chapter 5: Currency Futures and Futures Markets

5.1 The Evolution of Futures Markets

5.2 Futures Contracts

5.3 Forward Versus Futures Market Hedges

5.4 Hedging with Currency Futures

5.5 Summary

Chapter 6: Currency Options and Options Markets

6.1 What Is an Option?

6.2 Option Payoff Profiles

6.3 Currency Option Values Prior to Expiration

6.4 Hedging with Currency Options

6.5 Exchange Rate Volatility Revisited

6.6 Summary

Appendix 6A: Currency Option Valuation

Chapter 7: Currency Swaps and Swaps Markets

7.1 The Growth of the Swaps Market

7.2 Swaps as Portfolios of Forward Contracts

7.3 Currency Swaps

7.4 Interest Rate Swaps

7.5 Other Types of Swaps

7.6 Hedging the Swap Bank’s Exposure to Financial Price Risk

7.7 Summary

Part Three: Managing the Risks of Multinational Operations

Chapter 8: Multinational Treasury Management

8.1 Determining Financial Goals and Strategies

8.2 Managing International Trade

8.3 Payment Methods and Financing for International Trade

8.4 Managing Cash Flows

8.5 Managing Exposures to Currency Risk

8.6 Summary

Appendix 8A: The Rationale for Hedging Currency Risk

Chapter 9: Managing Transaction Exposure to Currency Risk

9.1 Transaction Exposure to Currency Risk

9.2 Managing Transaction Exposures Internally

9.3 Managing Transaction Exposures in the Financial Markets

9.4 Treasury Management in Practice

9.5 Summary

Chapter 10: Managing Operating Exposure to Currency Risk

10.1 Operating Exposures to Currency Risk

10.2 The Exposure of Shareholders’ Equity

10.3 Managing Operating Exposures in the Financial Markets

10.4 Managing Operating Exposures Through Operations

10.5 Pricing Strategy and the Competitive Environment

10.6 Summary

Chapter 11: Managing Translation Exposure and Accounting for Financial Transactions

11.1 Financial Accounting and Reporting Standards

11.2 The Current Rate Method of IAS 21 and ASC 830–30

11.3 Corporate Hedging of Translation Exposure

11.4 Accounting for Financial Market Instruments

11.5 Accounting, Disclosure, and Corporate Hedging Activities

11.6 Summary

Part Four: Valuation and the Structure of Multinational Operations

Chapter 12: Foreign Market Entry and Country Risk Management

12.1 Strategic Entry into International Markets

12.2 Country Risk Assessment

12.3 Strategies for Managing Country Risk

12.4 Protecting the Multinational’s Competitive Advantages

12.5 Summary

Chapter 13: Multinational Capital Budgeting

13.1 The Algebra of Multinational Capital Budgeting

13.2 An Example: Wendy’s Restaurant in Neverland

13.3 International Parity Disequilibria

13.4 Special Circumstances in Cross-Border Investments

13.5 Summary

Chapter 14: Multinational Capital Structure and Cost of Capital

14.1 Capital Structure and the Cost of Capital

14.2 Valuation of a Foreign Project with the WACC

14.3 The Cost of Capital on Multinational Operations

14.4 Sources of Funds for Multinational Operations

14.5 The International Evidence of Capital Structure

14.6 Summary

Chapter 15: Taxes and Multinational Corporate Strategy

15.1 The Objectives of National Tax Policy

15.2 Types of Taxation

15.3 Taxes and Organization Form

15.4 U.S. Taxation of Foreign-Source Income

15.5 Transfer Pricing and Tax Planning

15.6 Taxes and the Location of Foreign Assets and Liabilities

15.7 Summary

Chapter 16: Real Options and Cross-Border Investment Strategy

16.1 Real Options and the Theory and Practice of Investment

16.2 Market Entry as a Simple Real Option

16.3 Uncertainty and the Value of the Option to Invest

16.4 Market Entry as a Compound Real Option

16.5 The Real Option Approach as Complement to NPV

16.6 Summary

Chapter 17: Corporate Governance and the International Market for Corporate Control

17.1 Corporate Governance

17.2 The International Market for Corporate Control

17.3 The International Evidence on Mergers and Acquisitions

17.4 Summary

Part Five: International Portfolio Investment and Asset Pricing

Chapter 18: International Capital Markets

18.1 Domestic and International Capital Markets

18.2 International Investment Vehicles

18.3 Cross-Border Financial Statement Analysis

18.4 Summary

Chapter 19: International Portfolio Diversification

19.1 The Algebra of Portfolio Diversification

19.2 Returns on Foreign Investments

19.3 The Benefits of International Portfolio Diversification

19.4 Home Bias

19.5 Summary

Chapter 20: International Asset Pricing

20.1 The International Capital Asset Pricing Model (IAPM)

20.2 Factor Models of Expected and Required Return

20.3 Contemporary Asset Pricing Models

20.4 Summary

Appendix: Useful Rules and Formulas