课程财务管理基础英文ch课件

1、24-1 Pearson Education Limited 2004 Fundamentals of Financial Management, 12/e Created by: Gregory A. Kuhlemeyer, Ph.D. Carroll College, Waukesha, WI 24-2 uExplain why many firms invest in foreign operations. uExplain why foreign investment is different from domestic investment. uDescribe how capita

2、l budgeting, in an international environment, is similar or dissimilar to that in a domestic environment. uUnderstand the types of exchange-rate exposure and how to manage exchange-rate risk exposure. uCompute domestic equivalents of foreign currencies given the spot or forward exchange rates. uUnde

3、rstand and illustrate the purchasing-power parity (PPP) and interest rate parity. uDescribe the specific instruments and documents used in structuring international trade transactions. uDistinguish among countertrade, export factoring, and forfaiting. 24-3 uSome Background uTypes of Exchange-Rate Ri

4、sk Exposure uManagement of Exchange-Rate Risk Exposure uStructuring International Trade Transactions 24-4 uFill product gaps in foreign markets where excess returns can be earned. uTo produce products in foreign markets more efficiently than domestically. uTo secure the necessary raw materials requi

5、red for product production. 24-5 1.Estimate expected cash flows in the foreign currency. 2.Compute their U.S.-dollar equivalents at the expected exchange rate. 3.Determine the NPV of the project using the U.S. required rate of return, with the rate adjusted upward or downward for any risk premium ef

6、fect associated with the foreign investment. 24-6 uOnly consider those cash flows that can be “repatriated” (returned) to the home- country parent. uThe is the number of units of one currency that may be purchased with one unit of another currency. uFor example, the current exchange rate might be 2.

7、50 Freedonian marks per one U.S. dollar. 24-7 uA firm is considering an investment in Freedonia, and the initial cash outlay is 1.5 million marks. uThe project has 4-year project life with cash flows given on the next slide. uThe for repatriated U.S. dollars . uThe appropriate are given on the next

8、slide. 24-8 0 - 1 2 3 4 Net Present Value = 63,202 End of Year(marks)(U.S. dollars) (marks to U.S. dollar) 24-9 uInternational diversification and risk reduction uU.S. Government taxation uTaxable income derived from non-domestic operations through a branch or division is taxed under U.S. code. uFor

9、eign subsidiaries are taxed under foreign tax codes until dividends are received by the U.S. parent from the foreign subsidiary. 24-10 uTax codes and policies differ from country to country, but all countries impose income taxes on foreign companies. uThe U.S. government provides a tax credit to com

10、panies to avoid the double taxation problem. uA credit is provided up to the amount of the foreign tax, but not to exceed the same proportion of taxable earnings from the foreign country. uExcess tax credits can be carried forward. u Foreign Taxation 24-11 uExpropriation is the ultimate political ri

11、sk. uDeveloping countries may provide financial incentives to enhance foreign investment. uBottom line: . uProtect the firm by hiring local nationals, acting responsibly in the eyes of the host government, entering joint ventures, making the subsidiary reliant on the parent company, and/or purchasin

12、g . u Political Risk 24-12 can be thought of as the volatility of the exchange rate of one currency for another (say British pounds per U.S. dollar). - The rate today for exchanging one currency for another . - The rate today for exchanging one currency for another . 24-13 - Relates to the change in

13、 accounting income and balance sheet statements caused by changes in exchange rates. - Relates to settling a particular transaction at one exchange rate when the obligation was originally recorded at another. Involves changes in expected future cash flows, and hence economic value, caused by a chang

14、e in exchange rates. 24-14 uNatural hedges uCash management uAdjusting of intracompany accounts uInternational financing hedges uCurrency market hedges 24-15 uBoth scenarios are natural hedges as any gain (loss) from exchange rate fluctuations in pricing is reduced by an offsetting loss (gain) in co

15、sts in similar global markets. Globally Domestically Determined Determined Pricing X Cost X PricingX CostX 24-16 uBoth of these scenarios are not natural hedges and thus create a possible firm exposure to events that impact one market and not the other market. Globally Domestically Determined Determ

16、ined Pricing X CostX Pricing X Cost X 24-17 uExchange cash for real assets (inventories) whose value is in their use rather than tied to a currency. uReduce or avoid the amount of trade credit that will be extended as the dollar value that the firm will receive is reduced and reduce any cash that do

17、es arrive as quickly as possible. uObtain trade credit or borrow in the local currency so that the money is repaid with fewer dollars. 24-18 uGenerally, one cannot predict the future exchange rates, and the best policy would be to balance monetary assets against monetary liabilities to neutralize th

18、e effect of exchange- rate fluctuations. uA is a company-owned financial subsidiary that purchases exported goods from company affiliates and resells (reinvoices) them to other affiliates or independent customers. 24-19 uGenerally, the reinvoicing center is billed in the selling units home currency

19、and bills the purchasing unit in that units home currency. uAllows better management of intracompany transactions. - A system in which cross-border purchases among participating subsidiaries of the same company are netted so that each participant pays or receives only the net amount of its intracomp

20、any purchases and sales. 24-20 uForeign commercial banks perform essentially the same financing functions as domestic banks except: uThey allow longer term loans. uLoans are generally made on an . uNearly all major commercial cities have U.S. bank branches or offices available for customers. uThe us

21、e of “discounting” trade bills is widely utilized in Europe versus minimal usage in the United States. 24-21 uEurodollars are bank deposits denominated in U.S. dollars but not subject to U.S. banking regulations. uThis market is unregulated. Therefore, the differential between the rate paid on depos

22、its and that charged on loans varies according to the risk of the borrower and current supply and demand forces. uRates are typically quoted in terms of the LIBOR. uIt is a major source of short-term financing for the working capital requirements of the multinational company. 24-22 uAis a bond issue

23、d internationally outside of the country in whose currency the bond is denominated. uThe Eurobond is issued in a single currency, but is placed in multiple countries. uA is issued by a foreign government or corporation in a local market. For example, Yankee bonds, and Samurai bonds. uMany internatio

24、nal debt issues are that carry a variable interest rate. 24-23 uCurrency-option bonds provide the holder with the option to choose the currency in which payment is received. For example, a bond might allow you to choose between yen and U.S. dollars. uCurrency cocktail bonds provide a degree of excha

25、nge- rate stability by having principal and interest payments being a weighted average of a “basket” of currencies. uDual-currency bonds have their purchase price and coupon payments denominated in one currency, while a different currency is used to make principal payments. 24-24 uEach country has a

26、 representative currency like the $ (dollar) in the United States or the (pound) in Britain. uOn January 1, 1999, the “euro” started trading. uThe euro is the common currency of the European Monetary Union (EMU), which currently includes the following 12 European Union (EU) countries: uAustria, Belg

27、ium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The name given to the single European currency. Symbol is (much like the dollar, $). 24-25 uA is a contract for the delivery of a commodity, foreign currency, or financial instrument at a price s

28、pecified now, with delivery and settlement at a specified future date. Spot rate $.168 per EFr 90-day forward rate .166 per EFr uAs shown, the Elbonian franc (EFr) is said to sell at a as the forward price is less than the spot rate. uIf the forward rate is $.171, the EFr is said to sell at a . 24-2

29、6 uThe firm has the option of selling 1 million Elbonian francs forward 90 days. The firm will receive $166,000 in 90 days (1 million Elbonian francs x $.166). uTherefore, if the actual spot price in 90 days is less than .166, the firm benefited from entering into this transaction. uIf the rate is g

30、reater than .166, the firm would have benefited from not entering into the transaction. Fillups Electronics has just sold equipment worth 1 million Elbonian francs with credit terms of “net 90.” 24-27 uTypical discount or premium ranges for stable currencies are from 0 to 8%, but may be as high as 2

31、0% for unstable currencies. = ( $.002 )/( $.168 ) X ( 365 days / 90 days) = .011905 X 4.0556 = .0483 or 24-28 uA is a contract for the delivery of a commodity, foreign currency, or financial instrument at a specified price on a stipulated future date. uA currency futures market exists for the major

32、currencies of the world. uFutures contracts are traded on organized exchanges. uThe clearinghouse of the exchange interposes itself between the buyer and the seller. Therefore, transactions are not made directly between two parties. uVery few contracts involve actual delivery at expiration. 24-29 uS

33、ellers (buyers) cancel a contract by purchasing (selling) another contract. This is an offsetting position that closes out the original contract with the clearinghouse. uFutures contracts are marked-to-market daily. This is different than forward contracts that are settled only at maturity. uContrac

34、ts come in only standard-size contracts (e.g., 12.5 million yen per contract). 24-30 uA is a contract that gives the holder the right to buy (call) or sell (put) a specific amount of a foreign currency at some specified price until a certain (expiration) date. uCurrency options hedge only adverse cu

35、rrency movements (“one-sided” risk). For example, a put option can hedge only downside movements in the currency exchange rate. uOptions exist in both the spot and futures markets. uThe value depends on exchange rate volatility. 24-31 uIn a two parties exchange debt obligations denominated in differ

36、ent currencies. Each party agrees to pay the others interest obligation. At maturity, principal amounts are exchanged, usually at a rate of exchange agreed to in advance. uThe exchange is notional - only the cash flow difference is paid. uSwaps are typically arranged through a financial intermediary

37、, such as a commercial bank. uA variety of (complex) arrangements are available. 24-32 uThe idea that a basket of goods should sell for the same price in two countries, after exchange rates are taken into account. uFor example, the price of wheat in Canadian and U.S. markets should trade at the same

38、 price (after adjusting for the exchange rate). If the price of wheat is lower in Canada, then purchasers will buy wheat in Canada as long as the price is cheaper (after accounting for transportation costs). 24-33 uThus, demand will fall in the U.S. and increase in Canada to bring prices back into e

39、quilibrium. uThe price elasticity of exports and imports influences the relationship between a countrys exchange rate and its purchasing-power parity. uCommodity items and products in mature industries are more likely to conform to PPP. uFrictions such as government intervention and trade barriers c

40、ause PPP not to hold. 24-34 uIt suggests that if interest rates are higher in one country than they are in another, the formers currency will sell at a discount in the forward market. uRemember that the Fisher effect implies that the nominal rate of interest equals the real rate of interest plus the

41、 expected rate of inflation. uThe international Fisher effect suggests that differences in interest rates between two countries serve as a proxy for differences in expected inflation. 24-35 F = current forward exchange-rate in foreign currency per dollar. S = current spot exchange-rate in foreign cu

42、rrency per dollar. rforeign = foreign interbank Euromarket interest rate rdollar = U.S. interbank Euromarket interest rate The international Fisher effect suggests: F S = 1 + rforeign 1 + rdollar 24-36 uThe current German 90-day interest rate is 4%. uThe current U.S. 90-day interest rate is 2%. uThe

43、 current spot rate is .706 Freedonian marks per U.S. dollar ($1.416 per mark). 24-37 F = (1.04) x () / (1.02) = Thus, the is . The is: F = 1 + .04 1 + .02 24-38 uIn international trade, sellers often have difficulty obtaining thorough and accurate credit information on potential buyers. uChannels fo

44、r legal settlement in cases of default are more complicated and costly to pursue. uKey documents are (1) an order to pay (international trade draft), (2) a bill of lading, and (3) a letter of credit. 24-39 uThe is a written statement by the exporter ordering the importer to pay a specific amount of

45、money at a specified time. is payable on presentation to the party (drawee) to whom the draft is addressed. is payable at a specified future date after sight to the party (drawee) to whom the draft is addressed. 24-40 uAn unconditional order in writing signed by the drawer, the exporter. uIt specifi

46、es an exact amount of money that the drawee, the importer, must pay. uIt specifies the future date when this amount must be paid. uUpon presentation to the drawee, it is . 24-41 uThe acceptance can be by either the or a . uIf the drawee accepts the draft, it is acknowledged in writing on the back of the draft the obligation to pay the amount so many specified days hence. uIt is then known as a ( if a bank accepts the draft). 24-42 uIt serves as a receipt from the transportation company to the exporter, showing that specified goods have been received. uIt serv