Tài chính doanh nghiệp - Finance 407: Multinational financial management

Topic #1: Introduction to multinational financeL. GattisThe Pennsylvania State UniversityFinance 407: Multinational Financial Management1Problems2(Topic 8) Suppose the spot Mexican peso is P12.5 – P12.6 and one year forward market is 12.8-12.9. Mexican investing and borrowing interest rates are 8-10%. U.S. investing and borrowing interest rates are 1-3%. The Mexican credit default swap (CDS) market rate is 150bps-175bps. What are your USD covered interest arbitrage profits with a CDS borrowing $100,000 in the U.S. and investing pesos?(Topic 14) Bayer Material Science division is considering an investment in Chile. The project would cost 100,000 Chilean pesos today and is expected to return 120,000 pesos in one year. The USD WACC for the Chilean investment is 15%. The spot price is 450 Peso/USD. Interest rates in the U.S. are 3% and interest rates in Chile are 7%. What is the USD NPV converting the peso FCFs to USD using the IRP exchange rate and discounting at the USD WACC?(Topic 18) Assume that a global portfolio has an expected return of 8% and standard deviation of 16%. domestic portfolio has an expected return of 6% and standard deviation of 14%. The risk free rate of return is 1%. What is the global volatility improvement (reduction in standard deviation) if an investor desires a 4% expected return? What are the portfolio weights in the global portfolio and risk free asset to achieve the targeted expected return?Polls3- Turn on iclicker, hold power until blinking, press DD to set classroom frequencyI. I have used clickers in the classroomTrue: I have used iclickersFalse: I have NOT used iclickersII. Previous iclicker experienceFavorable view of iclickers in the classroomNegative view of iclickers in the classroomLearning Objectives and Agenda4AgendaSyllabus ReviewPowerPoint #1Learning ObjectiveStudents understand the course learning objectives, requirements, and methodsStudents understand what globalization is and how it affects financial managers.Finance Careers5AreasRetail Financial ServicesInvestment ManagementCorporate FinanceIndustriesRetail Banking; Mortgage; Fin. Advising; Credit CardsMutual Funds, Pension, Hedge Funds, Investment BankingAllObjectiveMaximize fees and net interest income while limiting riskMaximize funds under mgmt, fees and risk-adj. returnsSelect, finance, and manage value-creating projectsNamesBank of America, MBNA, M&T Bank, Capital One, UBS, PNC Bank Goldman, T. Rowe Price, Fidelity, Legg Mason, J.P. MorganJ&J, IBM, Lockheed Martin, GE, P&G56AreasFinancial ServicesInvestment ManagementCorporate FinanceActivities IncludeSales, Lending, Investing, Borrowing, Regulatory Compliance, ReportingI. Sell Side(Securities/Services/ I-Bank)II. Buy SideFront Office (Sales/PMs/Trading) Middle Office(P&L, Risk Mgt)Back-Office(Admin/Reporting/IT)Capital Budgeting, Planning, Raising Funds, Budgeting, ReportingFinance 407 Topics- Exchange Rates and Foreign Exchange Markets (a.k.a. “forex”, “fx”, and “currency” markets”)- forex transactions Foreign investing Currency Trading Global Portfolio Optimization Currency Arbitrage Valuing foreign projects Foreign financing Measuring and managing exchange rate and country risk6Finance CareersPoll7What area of finance are you most interest in? Financial Services Investment Management Corporate FinanceWhat is Globalization?8Poll9Is globalization good?A. Yes B. NoPoll: of Economic Globalization10Completely DomesticFinancial TransactionsLoans, Stocks, Bonds, BankingExporting Production, Importing MaterialsLicensing/Franchising to Foreign CompanyOutsourcingForeign Direct InvestmentLong-term investmentActive ManagementForms: Factory, Subsidiary, Division, Global StructureWhy Go Global?11Expand Market for productsAccess to new markets, customers, higher growth economiesMinimize CostsLabor, technology, knowledge, regulation, proximity to marketFinancial AdvantageReduce tax, Circumvent Currency Controls, International DiversificationNutella12Shanghai -- 198713Shanghai -- 201314FDI Trend and Geography15Question16What factors contributing to FDI growth over the last 25 year? Textbook17Shapiro and Sarin’s Foundation of Multinational Finance 6th Ed. Chapter 1 discusses globalization, multinational corporations, and foreign direct investment.iClicker: Class Evaluation18How would you rate today’s class? Highest Lowest