Multinational Finance by Kirt C. Butler

1. 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 world’s markets for • goods • services • financial assets and liabilities

2. Multinational Finance Everything should be made as simple as possible, but not simpler.Albert Einstein

3. 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 Corporation’s Investment Decisions PART IV The Multinational Corporation’s Financial Decisions PART V Derivative Securities for Hedging Currency Risk PART VI International Capital Markets and Portfolio Investment

4. 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

5. 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 corporation’s 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

6. 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

7. The value of multinationality V = St [E[CFt] / (1+it)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

8. Multinational investment opportunities

9. Multinational financing opportunities

10. The value of the multinational corporation

11. 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

12. 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

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

14. Governance of the multinational corporation

15. Claims on corporate revenues