国际财务管理-Short-Term-Finan课件

Chapter8Short-TermFinancing1ppt课件Chapter8Short-TermFinancing1ObjectivesThischapterexplainsshort-termliabilitymanagementofMNCs,apartofmultinationalmanagementthatisoftenneglectedinothertextbooks.Fromthischapter,weshouldlearnthatcorrectfinancingdecisionscanreducethefirm’scostsandmaximizethevalueoftheMNC.Whileforeignfinancingcostscannotusuallybeperfectlyforecasted,firmsshouldevaluatetheprobabilityofreducingcoststhroughforeignfinancing.Thespecificobjectivesare:2ppt课件ObjectivesThischapterexpObjectivestoexplainwhyMNCsconsiderforeignfinancing;toexplainhowMNCsdeterminewhethertouseforeignfinancing;andtoillustratethepossiblebenefitsoffinancingwithaportfolioofcurrencies.3ppt课件ObjectivestoexplainwhyMNPre-classDiscussionIfafirmconsistentlyexportstoacountrywithlowinterestratesandneedstoconsistentlyborrowfunds,explainhowitcouldcoordinateitsinvoicingandfinancingtoreduceitsfinancingcosts.Whatistheriskofborrowingalowinterestratecurrency?AssumethatforeigncurrenciesX,Y,andZarehighlycorrelated.Ifafirmdiversifiesitsfinancingamongthesethreecurrencies,willitsubstantiallyreduceitsexchangerateexposure?Explain.4ppt课件Pre-classDiscussionIfafirInternalFinancingbyMNCsBeforeanMNC’sparentorsubsidiarysearchesforoutsidefunding,itshoulddetermineifanyinternalfundsareavailable.ParentsofMNCsmayalsoraisefundsbyincreasingtheirmarkupsonthesuppliesthattheysendtotheirsubsidiaries.5ppt课件InternalFinancingbyMNCsBefoSourcesofShort-TermFinancingEuronotes

areunsecureddebtsecuritieswithtypicalmaturitiesof1,3or6months.Theyareunderwrittenbycommercialbanks.MNCsmayalsoissueEuro-commercialpaperstoobtainshort-termfinancing.MNCsutilizedirectEurobankloanstomaintainarelationshipwiththebankstoo.6ppt课件SourcesofShort-TermFinancinWhyMNCsConsider

ForeignFinancingAnMNCmayfinanceinaforeigncurrencytooffsetanetreceivables

positioninthatforeigncurrency.AnMNCmayalsoconsiderborrowingforeigncurrencieswhentheinterestratesonsuchcurrenciesareattractive,soastoreducethecostsoffinancing.7ppt课件WhyMNCsConsider

ForeignFinaDeterminingthe

EffectiveFinancingRateTheactualcostoffinancingdependsontheinterestrateontheloan,andthemovementinthevalueoftheborrowedcurrencyoverthelifeoftheloan.

Example:howtocomputetheeffectivefinancingrate8ppt课件Determiningthe

EffectiveFina

Howtocomputetheeffectivefinancingrate(Example)

Dearborn,Inc.(basedinMichigan),obtainsaone-yearloanof$1,000,000inNewZealanddollars(NZ$)atthequotedinterestrateof8

percent.WhenDearbornreceivestheloan,itconvertstheNZ$toUS$topayasupplierformaterials.Theexchangerateatthattimeis$.50,sotheNZ$1,000,000isconvertedto$500,000(1,000,000*$.50).Oneyearlater,DearbornpaysbacktheloanofNZ$1,000,000plusinterestofNZ$80,000

(8%*NZ$1,000,000).Thus,thetotalamountinNewZealanddollarsneededbyDearbornisNZ$1,080,000(1,000,000+80,000).AssumetheNewZealanddollarappreciatesfrom$.50to$.60bythetimetheloanistoberepaid.Dearbornwillneedtoconvert$648,000

9ppt课件

Howtocomputetheeffe

Howtocomputetheeffectivefinancingrate(Example)

(1,080,000*$.60)tohavethenecessarynumberofNewZealanddollarsforloanrepayment.Tocomputetheeffectivefinancingrate,firstdeterminetheamountinU.S.dollarsbeyondtheamountborrowedthatwaspaidback.ThendividebythenumberofU.S.dollarsborrowed(afterconvertingtheNewZealanddollarstoU.S.dollars).GiventhatDearbornborrowedtheequivalentof$500,000andpaidback$648,000fortheloan,theeffectivefinancingrateinthiscaseis$148,000/$500,000=29.6%.

10ppt课件

HowtocomputetheeffeDeterminingthe

EffectiveFinancingRateEffectivefinancingrate

rf=

(1+if)[1+(St+1-S)/S]-1 whereif= theinterestrateontheloan

S= beginningspotrate St+1= endingspotrateTheeffectiveratecanberewrittenasrf=(

1

+

if)(

1

+

ef)–1 where ef= the%Dinthespotrate11ppt课件Determiningthe

EffectiveFinaCriteriaConsideredfor

ForeignFinancingTherearevariouscriteriaanMNCmustconsiderinitsfinancingdecision,includinginterestrateparity,theforwardrateasaforecast,andexchangerateforecasts.12ppt课件CriteriaConsideredfor

ForeigCriteriaConsideredfor

ForeignFinancingInterestRateParity(IRP)IfIRPholds,foreignfinancingwithasimultaneoushedgeofthatpositionintheforwardmarketwillresultinfinancingcostssimilartothosefordomesticfinancing.13ppt课件CriteriaConsideredfor

ForeigCriteriaConsideredfor

ForeignFinancingTheForwardRateasaForecastIftheforwardrateisanaccurateestimateofthefuturespotrate,theforeignfinancingratewillbesimilartothehomefinancingrate.Iftheforwardrateisanunbiasedpredictorofthefuturespotrate,thentheeffectivefinancingrateofaforeignloanwillonaveragebeequaltothedomesticfinancingrate.Summaryof

theimplicationsofavarietyofscenariosrelatingtointerestrateparityandforwardrate.14ppt课件CriteriaConsideredfor

ForeigImplicationsofIRPforFinancingIRPholds?ScenarioTypeoffinancingFinancingcosts

YesCoveredSimilarYesForwardrateaccurately

UncoveredSimilar

predictsfuturespotrate

YesForwardrateoverestimates

Uncovered

Lower

futurespotrate

YesForwardrateunderestimates

UncoveredHigherfuturespotrate

NoForwardpremium(discount)

CoveredHigher

exceeds(islessthan)interest

ratedifferential

NoForwardpremium(discount)

CoveredLower

islessthan(exceeds)interestratedifferential15ppt课件ImplicationsofIRPforFinancCriteriaConsideredfor

ForeignFinancingExchangeRateForecastsFirmsmayuseexchangerateforecaststoforecasttheeffectivefinancingrateofaforeigncurrency,ortheymaycomputethebreak-evenexchangeratethatwillequatethedomesticandforeignfinancingrates.

Example:Sarasota,Inc.needsfundsforoneyearandisawarethattheone-yearinterestrateofU.S.dollaris12percentwhiletheinterestratefromborrowingSwissfrancsis8percent.SarasotaforecaststhattheSwissFrancwillappreciatefromitscurrentrateof$.45to$.459,orby

2

percentoverthenextyear.Theexpectedvalueforefwillthereforebe2percent.Thus,theexpectedeffective

16ppt课件CriteriaConsideredfor

ForeigCriteriaConsideredfor

ForeignFinancing

financingratewillbeE(rf)=(1+if)[1+E(ef)]–1=(1+.08)(1+.02)–1=.1016(10.16%)Thus,financingisSwissfrancsisexpectedtobelessexpensivethanfinancinginU.S.dollars,thoughstillwithuncertainty.Todeterminewhatvalueofefwouldmaketheeffectiveratefromforeignfinancingthesameasdomesticfinancing,wecouldusetheeffectivefinancingrateformulaandsolveforef:17ppt课件CriteriaConsideredfor

ForeigCriteriaConsideredfor

ForeignFinancing

ef=(1+rf)/(1+if)–1Inthisexample,rfis12percentandifis8percent,so

ef=(1+.12)/(1+.08)–1=.037037(3.7037%)ThissuggeststhattheSwissfrankwouldhavetoappreciatebyabout3.7percentovertheloanperiodtomaketheSwissfrancloanascostlyasaloaninU.S.dollar.18ppt课件CriteriaConsideredfor

ForeigCriteriaConsideredfor

ForeignFinancingSometimes,itmaybeusefultodevelopprobabilitydistributions,insteadofrelyingonsinglepointestimates.Thefirmcancomparethisdistributiontotheknownfinancingrateofthehomecurrencytomakeitsfinancingdecision.

(Example:P480-481)19ppt课件CriteriaConsideredfor

ForeigActualResults

FromForeignFinancingThefactthatsomefirmsutilizeforeignfinancingsuggeststhattheybelievereducedfinancingcostscanbeachieved.20ppt课件ActualResults

FromForeignFiFinancingwitha

PortfolioofCurrenciesWhileforeignfinancingcanresultinsignificantlylowerfinancingcosts,thevarianceinthecostsishigher.MNCsmaybeabletoachievelowerfinancingcostswithoutexcessiveriskbyfinancingwithaportfolioofcurrencies.

(Example:P483-485)21ppt课件Financingwitha

PortfolioofFinancingwitha

PortfolioofCurrenciesIfthechosencurrenciesarenothighlypositivelycorrelated,theywillnotbelikelytoexperienceahighlevelofappreciationsimultaneously.Thus,thechancesthattheportfolio’seffectivefinancingratewillexceedthedomesticfinancingratearereduced.22ppt课件Financingwitha

PortfolioofFinancingwitha

PortfolioofCurrenciesAfirmthatrepeatedlyfinancesinacurrencyportfoliowillnormallyprefertocomposeafinancingpackagethatexhibitsasomewhatpredictableeffectivefinancingrateonaperiodicbasis.Whencomparingdifferentfinancingpackages,thevariancecanbeusedtomeasurehowvolatileaportfolio’seffectivefinancingrateis.23ppt课件Financingwitha

PortfolioofFinancingwitha

PortfolioofCurrenciesForatwo-currencyportfolio,

E(rP)=wAE(rA)+wBE(rB)where rP=theeffectivefinancingrateoftheportfolio

rX=theeffectivefinancingrateofcurrencyX

wX=the%oftotalfundsfinancedfromcurrencyX24ppt课件Financingwitha

PortfolioofFinancingwitha

PortfolioofCurrenciesForatwo-currencyportfolio,

Var(rP)=wA2A2+wB2B2+2wAwBABCORRAB X2=thevarianceofcurrencyX’seffectivefinancingrateCORRAB=thecorrelationcoefficientofthetwocurrencies’effectivefinancerates25ppt课件Financingwitha

PortfolioofQuestionsandApplications1.ExplainwhyanMNCparentwouldconsiderfinancingfromitssubsidiaries.2.Explainhowafirm’sdegreeofriskaversionentersintoitsdecisionofwhethertofinanceinaforeigncurrencyoralocalcurrency.Whatmotivatesthefirmtoevenconsiderfinancinginaforeigncurrency?26ppt课件QuestionsandApplications1.QuestionsandApplications

3.Discusstheuseofspecifyingabreak-evenpointwhenfinancinginaforeigncurrency.4.Boca,Inc.,needs$4millionforoneyear.ItcurrentlyhasnobusinessinJapanbutplanstoborrowJapaneseyenfromaJapanesebankbecausetheJapaneseinterestrateisthreepercentagepointslowerthantheU.S.rate.Assumethatinterestrateparityexists;alsoassumethatBocabelievesthattheone-yearforwardrateoftheJapaneseyenwillexceedthefuturespotrateoneyearfromnow.Willtheexpectedeffectivefinancingratebehigher,lower,orthesameasfinancingwithdollars?Explain.27ppt课件QuestionsandApplicationsQuestionsandApplications

5.AkronCo.needsdollars.Assumethatthelocalone-yearloanrateis15percent,whileaone-yearloanrateoneurosis7percent.ByhowmuchmusttheeuroappreciatetocausetheloanineurostobemorecostlythanaU.S.dollarloan?6.Missoula,Inc.,decidestoborrowJapaneseyenforoneyear.Theinterestrateontheborrowedyenis8percent.Missoulahasdevelopedthefollowingprobabilitydistributionfortheyen’sdegreeoffluctuationagainstthedollar:28ppt课件QuestionsandApplications5QuestionsandApplicationsPossibleDegreeofFluctuationPercentageofYenAgainsttheDollarProbability-4%20%-1%30%010%3%40%Giventhisinformation,whatist