Multinational Finance by Kirt C. Butler

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Multinational Financeby Kirt C. Butler

• This book takes the perspective of a financial
  manager in a multinational corporation
• and develops a framework for evaluating the
  opportunities, costs, and risks of operating in
  the worlds markets for
• goods
• services
• financial assets and liabilities

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Multinational Finance

• Everything should be made as simple as possible,
  but not simpler.Albert Einstein

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Table of Contents

• PART I Overview and Background
• Chapter 1 Introduction to Multinational Finance
• Chapter 2 World Trade and the International
  Monetary System
• PART II Foreign Exchange and Exchange Rate
  Determination
• PART III The Multinational Corporations
  Investment Decisions
• PART IV The Multinational Corporations Financial
  Decisions
• PART V Derivative Securities for Hedging Currency
  Risk
• PART VI International Capital Markets and
• Portfolio Investment

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Success in International Business

• Success in international business depends on an
  ability to...
• recognize and capitalize on opportunities in
  national markets for goods and services
• recognize and minimize the costs and risks posed
  by multinational operations
• work effectively within the constraints imposed
  by a variety of host governments and business
  cultures

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Multinational financial management

• Financial management conducted in more than one
  cultural, social, economic, or political
  environment.
• Multidisciplinary across the fields of business.
• finance, marketing, management, production,
  distribution, purchasing, logistics, accounting,
  and taxation
• Interdisciplinary within the field of finance.
• the corporations investment and financing
  decisions
• conducted in international markets
• foreign exchange and Eurocurrency markets
• international capital (debt equity) markets
• international portfolio investment
• international markets for real assets

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Multinational financial management

• The notes I handle no better than many pianists,
  but the pauses between the notes - ah, that is
  where the art resides. Arthur Schnabel

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The value of multinationality

• V St ECFt / (1it)t
• Multinational investment policy
• higher returns from existing investments
• new investment opportunities
• Multinational financial policy
• possibility of reduced capital costs through
  access to international markets
• possibility of higher cash flows through
  arbitrage across international markets or
  national economic systems

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Multinational investment opportunities
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Multinational financing opportunities
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The value of the multinational corporation
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The challenges of multinationality

• Risk versus risk exposure
• Risk exists whenever actual outcomes can differ
  from expectations.
• A company has a risk exposure when its value can
  change with unexpected changes in business
  conditions
• Multinational corporations are exposed to a
  variety of new country risks
• Foreign exchange and other financial risks
• Political risks
• Cultural risks

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Cultural risk

• Cultural risks affect all areas of international
  business
• Differences in language
• Differences in business conventions
• Differences in marketing
• Differences in distribution
• Differences in personnal management
• Differences in legal, accounting, and tax
• Differences in financial markets
• Differences in corporate governance

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Cultural risk

• The gentle reader will never, never know what a
  consummate ass he can become, until he goes
  abroad.
• Mark Twain

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Governance of the multinational corporation
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Claims on corporate revenues