Professional Documents
Culture Documents
Bab 1 MKI
Bab 1 MKI
Financial Management
7th Edition
by
Jeff Madura
Florida Atlantic University
PowerPoint® Presentation
by
Yee-Tien Fu
National Cheng-Chi University
Taipei, Taiwan
South-Western/Thomson Learning © 2003
Part I
The International Financial Environment
Dividend
Remittance
Exporting & Financing Investing
& Importing & Financing
C1 - 4
Goal of the MNC
C1 - 5
Conflicts Against the MNC Goal
C1 - 6
Impact of Management Control
C1 - 7
Centralized Multinational Financial Management
for an MNC with two subsidiaries, A and B
Financing at A Financing at B
Financing at A Financing at B
C1 - 10
Impact of Management Control
C1 - 11
Impact of Corporate Control
C1 - 12
Constraints
Interfering with the MNC’s Goal
• As MNC managers attempt to maximize
their firm’s value, they may be confronted
with various constraints.
¤ Environmental constraints.
¤ Regulatory constraints.
¤ Ethical constraints.
C1 - 13
Theories of International Business
C1 - 14
Theories of International Business
C1 - 15
The International Product Life Cycle
C1 - 17
International
Business Methods
• Licensing allows a firm to provide its
technology in exchange for fees or some
other benefits.
• Franchising obligates a firm to provide a
specialized sales or service strategy,
support assistance, and possibly an initial
investment in the franchise in exchange
for periodic fees.
C1 - 18
International
Business Methods
• Firms may also penetrate foreign markets
by engaging in a joint venture (joint
ownership and operation) with firms that
reside in those markets.
• Acquisitions of existing operations in
foreign countries allow firms to quickly
gain control over foreign operations as
well as a share of the foreign market.
C1 - 19
International
Business Methods
• Firms can also penetrate foreign markets by
establishing new foreign subsidiaries.
• In general, any method of conducting
business that requires a direct investment in
foreign operations is referred to as a direct
foreign investment (DFI).
• The optimal international business method
may depend on the characteristics of the MNC.
C1 - 20
Degree of International Business by MNCs
Foreign Sales as a % of Total Sales
Foreign Assets as a % of Total Assets
66%
70% 62%
58%
60% 50%
46% 47%
50% 40%
40% 33%
30%
26%
20% 12%
10%
0%
Campbell's Dow IBM Motorola Nike
Soup Chemical
C1 - 21
Online Application
C1 - 22
http://www.tradenet.gov
C1 - 23
http://www.business.gov/busadv
/index.cfm
C1 - 24
http://www.trade.gov
http://www.export.gov
C1 - 25
International Opportunities
C1 - 26
International Opportunities
Cost-benefit Evaluation for
Purely Domestic Firms versus MNCs
Purely
Investment
Domestic
Opportunities MNC
Marginal Firm
Return on
Projects MNC
Purely
Marginal Domestic
Cost of Firm
Capital
Financing Appropriate
Opportunities Size for Purely Appropriate
Domestic Firm Size for MNC
X Y Asset Level
of Firm
C1 - 27
International Opportunities
• Opportunities in Europe
¤ The Single European Act of 1987.
¤ The removal of the Berlin Wall in 1989.
¤ The inception of the euro in 1999.
• Opportunities in Latin America
¤ The North American Free Trade Agreement
(NAFTA) of 1993.
¤ The General Agreement on Tariffs and Trade
(GATT) accord.
C1 - 28
International Opportunities
• Opportunities in Asia
¤ The reduction of investment restrictions by
many Asian countries during the 1990s.
¤ China’s potential for growth.
¤ The Asian economic crisis in 1997-1998.
C1 - 29
Online Application
C1 - 30
Exposure to International Risk
International business usually increases an
MNC’s exposure to:
exchange rate movements
¤ Exchange rate fluctuations affect cash flows and
foreign demand.
foreign economies
¤ Economic conditions affect demand.
political risk
¤ Political actions affect cash flows.
C1 - 31
Exposure to International Risk
U.S. Firm’s Cost of Obtaining £100,000
$165,000
$160,000
$155,000
$150,000
$145,000
$140,000
$135,000
$130,000
Jan Mar May Jul Sep Nov Jan Mar May
2000 2001
C1 - 32
Online Application
C1 - 33
Overview of an MNC’s Cash Flows
C1 - 34
Overview of an MNC’s Cash Flows
Profile B: MNCs focused on International Trade and
International Arrangements
C1 - 35
Overview of an MNC’s Cash Flows
Profile C: MNCs focused on International Trade, International
Arrangements, and Direct Foreign Investment
Payments for products
U.S. Customers
Payments for supplies
U.S. Businesses
Payments for exports
U.S.- Foreign Importers
based Payments for imports
MNC Foreign Exporters
Fees for services
Foreign Firms
Costs of services
Funds remitted
Foreign Subsidiaries
Funds invested
C1 - 36
Managing for Value
C1 - 37
Valuation Model for an MNC
• Domestic Model
n
E CF$, t
Value =
t =1 1 k t
C1 - 40
Valuation Model for an MNC
Impact of New International Opportunities
on an MNC’s Value
Exposure to
Foreign Economies Exchange Rate Risk
m
n
E CFj , t E ER j , t
j 1
Value =
t =1 1 k t
Political Risk
C1 - 41
How Chapters Relate to Valuation
Exchange Rate
Behavior Exchange Rate
(Chapters 6-8) Risk Management
(Chapters 9-12)
Background
on Long-Term
International Investment and
Financial Risk and Value and
Financing Return of Stock Price
Markets Decisions
(Chapters MNC of MNC
(Chapters 13-18)
2-5)
Short-Term
Investment and
Financing
Decisions
(Chapters 19-21)
Chapter Review
C1 - 43
Chapter Review
C1 - 44
Chapter Review
• International Opportunities
¤ Investment Opportunities
¤ Financing Opportunities
¤ Opportunities in Europe
¤ Opportunities in Latin America
¤ Opportunities in Asia
C1 - 45
Chapter Review
C1 - 46
Chapter Review
C1 - 47