Professional Documents
Culture Documents
by Jeff Madura
1
Part 1
The International Financial Environment
3
Managing the MNC
1. International trade
2. Licensing
3. Franchising
4. Joint Ventures
5. Acquisitions of existing operations
6. Establishing new foreign subsidiaries
E CF$,t
n
V t
t 1 1 k
Where
V represents present value of expected cash flows
E(CF$,t) represents expected cash flows to be received at the
end of period t,
n represents the number of periods into the future in which
cash flows are received, and
k represents the required rate of return by investors.
E CF$,t E CFj ,t E S j ,t
m
j 1
Where
CFj,t represents the amount of cash flow denominated in a
particular foreign currency j at the end of period t,
E CF$,t E CFj ,t E S j ,t
m
j 1
Derive an expected dollar cash flow value for each currency
Combine the cash flows among currencies within a given
period
E CF$,t E CFj ,t E S j ,t
m
j 1
E (CFst) =(100,000)+(1,000,000 pesos*0.09)
=$190,000