The Robert H. Smith School of Business
University of Maryland
International Financial Management
BUFN724 Section DC06 Spring 2005
Every second Saturday 8:15 AM 1:00 PM, Jan. 29-May 21
Instructor: Elinda Fishman Kiss
Office: VMH 4411 on College Park campus; in a faculty office in DC
Office Hours: immediately before and after class and by appointment
(Every Wednesday I am in VMH4411; on the weeks that we have a Saturday class, I will also be there on Thursday afternoons and Fridays)
Phone: office: 301-405-7538 cell: 215-962-9071
E-mail: EFKiss@aol.com or ekiss@rhsmith.umd.edu
Website: http://bb.rhsmith.umd.edu http://www.rhsmith.umd.edu/finance/elinda-kiss
The course material comes from lectures,
case studies, additional readings, and notes on Blackboard.
The text is intended as background reading
and for assignments. The suggested
chapter readings on page 5 and suggested problem assignments listed on page 6
are from the Madura text.
Recommended Text: International Financial
Management,
Seventh edition, by Madura,
Thompson Southwestern, 2003. http://madura.swcollege.com ISBN
0-324-16551-X
If you wish to look at another text, I recommend Fundamentals
of Multinational Finance, by Michael Moffett, Arthur Stonehill and
David Eiteman, Pearson Addison Wesley, 2003, http://www.aw-bc.com/catalog/academic/product/0,1144,0201844842,00.html
ISBN 0-201-84484-2
You may find it useful to review concepts in the Corporate Finance
textbook: Corporate Finance, 7th Edition, by
Ross, Westerfield, & Jaffe (ISBN 0-07-297123-1 or 0-07-282920-6) (www.mhhe.com/rwj)
It is not necessary for you to
read or purchase either the Moffett or the Ross text.
Calculator: It is advisable that you purchase a financial calculator if you
have not already done so. You will
learn how to use your calculator on your own, using the manual. An excellent financial calculator is Texas
Instruments BAII Plus or Hewlett Packard 17BII; also acceptable are HP10B &
HP12C.
Wall Street Journal: If you do not have access to the Wall
Street Journal, it is advisable that you purchase a student subscription,
which includes access to the on-line edition.
I have discount subscription forms.
For two assignments, you will use the Wall Street Journal.
Internet:
On my website, I have links to some financial web pages.
Instructor: Elinda Fishman Kiss (Ph.D. University of Rochester) has also
taught at The Wharton School, Wellesley College, Rutgers University, Temple
University, Drexel University, College of New Jersey, West Chester University
and Penn State University. She has
worked as Treasurer of a manufacturing firm (Custom Equipment), a commercial
banker (First Pennsylvania Bank), investment banker (Citibank, PSFS), and
federal government employee (Federal Reserve and RTC). Her research focuses on the European Central
Bank.
Course
Description: This course will cover the role of financial
management in the multinational firm.
We will examine such topics as currency fluctuations, measuring and
hedging exchange rate risk, comparative capital structure, multinational
investment, and international capital budgeting.
Prerequisite: BUSI640.
In addition, you should have a good grasp of
Algebra, and some working knowledge of Excel, Word, Accounting (BUSI610) and
Statistics (BUSI630).
The purpose of
this course is to introduce you to financial management from the perspective of
a multinational corporation. In response to globalization as well as advances
in communications, many firms, both small and large, now operate in two or more
countries. This situation exposes such firms to diversifiable exposures such as
exchange rate risk and non-diversifiable exposures such as political risk. We
will discuss the exposures that confront multinational firms, how such
exposures impact business strategy and operations, and how they can be
mitigated. Students should expect to
develop an integrated analytical and decision making perspective that will
enable them to extend financial concepts such as capital budgeting and risk
management, and instruments such as forwards, swaps, fixed income analysis,
arbitrage, etc. to their international analogs.
Grading
Midterm 40%
Final Exam or Paper 15%
Wall Street Journal Real World
Application Write Ups 10%
Homework and Class Participation 10%
Case Presentation and WriteUps 25%
Exams
There will be two exams, an
in-class, closed-book mid-term exam, on Saturday, March 26, 2005, and a final
exam, which will also be closed book, on Saturday, May 21, 2005. Both the mid-term and final exams will include
problem-oriented quantitative questions, and theoretical questions to ensure
understanding of conceptual material discussed in class. Please note that your
class notes will be the primary reference for exams. Your text is for background, and
more extensive readings, as well as for homework problems. For all exams, you
are allowed to bring in a financial calculator and an 8.5 x 11 sheet of paper
on which you can write equations and definitions.
Homework in this class will take
several forms:
1) Quantitative and
conceptual problems: These will be assigned from the class text for the most part.
These are to be done individually or with one other person. The text problems to solve are listed on
page 6 of this syllabus. Changes in assigned problems will be announced in
class and in the Announcement section of Blackboard. After you have turned in your solutions, I
will post suggested answers in the Assignments section of
Blackboard. THE SOLVING OF THESE TEXT
PROBLEMS IS OPTIONAL and can only help your grade and your understanding of
the subject. There may be some other problems assigned later in the course
(announced or distributed in class and in Announcement and/or Assignment
section of Blackboard), which will be required to turn in.
You should work the problems applicable to that days
class before the next class meeting so that you can ask questions before
we move on to another topic. Grading
consists of my checking that all assigned problems
have been attempted and that random selections of problems are worked
correctly.
2) Ongoing case study: There is an ongoing case centered on a firm called Blades, Inc. in
the class text. When Blades is listed
on the assignment sheet, we will discuss the Blades case for that chapter in
class, if we have time. This
discussion usually will be one class meeting BEFORE the problems are due. Be prepared for the discussion, especially
chapters 4, 7, 8, 9, 11, 12.
3) Stand-alone Case Studies:
Specific case
studies to illustrate concepts will be discussed in class. Students must solve the case
studies using techniques from basic finance, statistics, or the concepts
introduced in this course. Students are
encouraged to work in groups of up to 3 people. One student group will present their solution in class and help
lead the discussion. Other groups
should hand in written solutions in the form of a business report to management
consisting of 3 typewritten pages (plus appendices). Written cases are due at the beginning of class on the day of
discussion (see calendar on page 5). The cases are listed on page 4.
4) Real
World Applications: THIS PROJECT MUST BE DONE INDIVIDUALLY. Students will create two
different real world applications using articles from the Wall Street
Journal. It is recommended that all
students subscribe to the journal for the semester. This will be facilitated through the professor on the first day
of classes. Write-ups should be two
pages typed, double-spaced, 12 pt. font.
THIS IS NOT A SUMMARY OF THE ARTICLE!
An explicit link to class material must be expressly illustrated and the
article must be attached to the write-up.
The explicit link must indicate specific page references from the text
or the date of class notes. The
write-ups will be graded on the relevance of the article to class material,
the analysis of the article, the link provided and language (grammar and
spelling). Note: Articles must be timely (within a month of
print) but the subject matter to which the article is linked may be anything we
have discussed thus far. I would prefer
that you use an actual article, NOT the daily Currency Trading column. The second article should be related to
material covered after the midterm, if possible. Due dates:
write-ups are due March 12 and May 7. Grades of WSJ write-ups will suffer if
article is not attached or if explicit link to class material is not
provided. Other periodicals may be used
if nothing relevant to class material can be found in recent WSJs. Alternative periodicals must be approved
by the professor BEFORE the assignment is due.
5)
Final paper
instead of the Final exam, students may opt to write a 15-30 page research
paper, on a topic that is pre-approved by the professor.
Grading
of homework
Assignments will be collected before class on
due date and graded according to the following scale:
0 - not acceptable (grossly incomplete)
1 - less than completely satisfactory (some missing
problems)
2 - satisfactory (all problems attempted and mostly
correct)
3 - excellent (all problems attempted and correct)
Course materials, which will
include lecture notes in PowerPoint, the course outline, and other
course-related information will be posted on the class website, which can be
accessed at: http://bb.rhsmith.umd.edu
. I recommend going through the lecture notes prior to coming to class. Reading
suggested chapters from your text ahead of class would be a beneficial strategy
in my estimation. Please check the class website regularly for updates. You are
responsible for any announcements made in class or on the class website.
The Universitys Code of Academic
Integrity is designed to ensure that the principles of academic honesty and
integrity are upheld. All students are expected to adhere to this code. All
acts of academic dishonesty will be dealt with in accordance with the
provisions of this code. For more information, please visit,
http://www.inform.umd.edu/campusinfo/departments/jpo/acinteg/code_acinteg2a.html .
On each exam or assignment you
will be asked to write out and sign the following pledge. "I pledge on my honor
that I have not given or received any unauthorized assistance on this exam/assignment."
Any student with special needs
should bring this to the attention of the instructor as soon as possible, but
not later than the second week of class.
Cases for you to present:
Dozier Industries (A) spot and forward rates (Darden: UVA-F-0745)
Tiffany & Co. 1993
options (HBS: 9-295-047)
Novo Industri A/S - 1981 international
equity, eurobond, ADRs, cost of capital, pre-emptive rights offerings (HBS: 9-286-084)
Grand Metropolitan PLC cost of capital (Darden:
UVA-F-1019)
Globalizing the Cost of Capital and
Capital Budgeting at AES capital budgeting (HBS: 9-204-109)
MSDI-Alcala de
Henares, Spain capital budgeting, International Fisher effect (HBS:
9-289-029)
The Walt Disney Companys Yen Financing
currency swaps (HBS: 9-287-058)
RJ Reynolds International Financing
dual currency bond; currency swap (HBS: 9-287-057)
Petrolera Zuata, Petrozuata C.A.
project finance (HBS: 9-299-012)
These cases are
available from www.xanedu.com
CoursePack Title: BUFN 724 International
Financial Management Section DC06
CoursePack ID: 229077
CoursePack Delivery:
Format: Digital access with desktop printing
Purchase Location: Ecommerce
Distribution Location: Online
CoursePack Price: $ 36.50
(Students will have the option to order a printed copy from XanEdu. Digital plus Print package: $
46.25) (price does not include shipping)
To access your CoursePack, students will need to do the
following:
1. Open the XanEdu "Login/Register" page at: http://www.xanedu.com/login?PackId=229077
2. If you have previously registered at XanEdu, log in.
If you are new to XanEdu, click the "Student Registration" button
under "New Users Register Here". Complete and submit the registration
form.
3. Confirm your CoursePack Selection, and complete the purchase form.
Choose one of these options for your CoursePack delivery:
Option 1: Digital access plus packaged print copy Price: $ 46.25 (price does not include shipping)
You will have immediate access to your Digital CoursePack; Your personal print copy will be shipped to
you within five business days from purchase of your CoursePack.
Shipping of a print copy is for valid U.S. addresses only. If you are
outside the U.S., choose Option 2 below.
Option 2: Digital access with desktop printing Price:
$ 36.50
You will have immediate access to your Digital CoursePack. You will not receive a printed copy of the
CoursePack. You can print your
CoursePack yourself, if your system hardware and connectivity supports
downloading and printing very large files from the Internet. If you are
not sure if your system supports this, XanEdu recommends that you select option
#1 above.
4. After completing the purchase, you will be taken directly to "My
XanEdu" where you can access your digital CoursePack.
Questions? Please contact XanEdu Customer Service at 1-800-218-5971.
Case presentations: Students must solve the case studies using techniques from basic finance, statistics, or the concepts introduced in this course. Students are encouraged to work in groups of up to 3 people. One student group will present their solution in class and help lead the discussion. Other groups should hand in written solutions in the form of a business report to management consisting of 3 typewritten pages (plus appendices). Written cases are due at the beginning of class on the day of discussion (see calendar on page 5). On February 12 or 26, you will select cases to present. I will present the first case (Proctor & Gamble: Mexico 1991). I will prepare suggested questions for each case and will put them in Blackboard in the Course Documents section.
Jan. 29 MNCs: An
Overview 1
The
International Monetary Environment 2,
3
Foreign
Exchange Rate Markets and Determination 3,4,
6
Feb. 12 Arbitrage,
International Fisher Effect, PPP, IRP 7
& 8
Currency
Derivatives 5
Feb. 26 Case: Proctor & Gamble: Mexico
1991
exchange rate risk in financing (Darden:
UVA-F-1060) -- discussion led by
Professor; students prepare written report
SECTION II: Exchange Rate Risk Management
Feb. 26 Determining
exposure to currency fluctuations 9
& 10
March 12 Case: Dozier Industries (A) spot and
forward rates (Darden: UVA-F-0745)
Case:
Tiffany
& Co. 1993 options (HBS: 9-295-047)
Hedging
as a risk management strategy 11
Managing
Transaction, Operating, & Translation Exposure 11 & 12
March 12 First Real World Project due
After
the midterm exam, we will cover chapter 17 in Madura text
March 26 Global Cost
of Capital and Financial Structure 17
Review
of Modigliani Miller Capital Structure RossWesterfieldJaffe Ch. 15
April 9 Foreign Direct Investment 13
& 16
Multinational
Capital Budgeting 14
Review
of Issuing Securities, Rights Offerings Ross Westerfield Jaffe Ch. 19
Case: Novo Industri A/S - 1981 international equity, eurobond, ADRs, cost of capital, pre-emptive rights offerings (HBS:
9-286-084)
Case: Grand Metropolitan PLC cost of capital (Darden:
UVA-F-1019)
April 23 Financing:
Short & Long Term; Swaps 18
& 20
Additional reading: Note on Foreign Currency Swaps (HBS: 9-292-043) (in XanEdu
pack)
And Professor Kiss notes on Swaps in ppt and
word on Blackboard
Case: Globalizing the Cost of Capital and Capital Budgeting at AES capital budgeting (HBS: 9-204-109)
OR MSDI-Alcala
de Henares, Spain capital budgeting, International Fisher Effect (HBS:
9-289-029)
May 5 Second Real World Project due
May 5 Case: Walt Disney Companys Yen Financing currency swaps (HBS: 9-287-058)
Case: RJ Reynolds International
Financing
dual currency bond; currency swap (HBS: 9-287-057)
Case: Petrolera Zuata, Petrozuata C.A. project finance (HBS: 9-299-012)
International Banking and/or Euro Professor Kiss notes
Baring Brothers &
Co. Note on Rogue Trader Nicolas Leeson
(Thunderbird: A06-99-0021)
May 21 Final
Exam --
if you write final paper instead of the final exam, I must receive it BEFORE
May 21 either email it or mail it or fax it or
hand it to me
** Please note that this class schedule and
reading list is tentative and is subject to change at any point in time as
deemed necessary by the professor.
Changes will be announced in class and on Blackboard. The Ross
Westerfield Jaffe readings are not necessary for this course, but may serve as
a helpful review of the material from BUSI640.
Suggested Problems to do
from the text these are Optional for BUFN724
Chapter
|
Questions and
Applications
|
|
2 |
9, 12, 16,
17, 19, Blades due Feb. 12 |
|
3 |
3, 6, 7, 14,
17, 22, 23 due Feb. 12 |
|
4 |
1, 4, 5, 11,
12, 19, 22, 23, Blades due Feb. 12 |
|
5 |
12, 15, 21,
24, 27 Blades due Feb. 26 |
|
6 |
2, 7, 21, 24
due Feb. 12 |
|
7 |
2, 5, 8, 10,
25, Blades due Feb. 26 |
|
8 |
14, 18, 23,
25, 35, Blades due Feb. 26 |
|
9 |
11, 13, 16,
25, Blades due March 12 |
|
10 |
2, 10, 19,
27, 29, Blades due March 12 |
|
11 |
1, 9, 16,
26, Blades due March 26 |
|
12 |
2, 12,
Blades due March 26 |
|
13 |
3, 5, 8
due April 23 |
|
14 |
8, 11 due
April 23 |
|
16 |
1, 5, 13
due April 23 |
|
17 |
1, 6, 17
due April 12 |
|
18 |
6, 11, 13
due May 7 |
|
20 |
11, 18 |
Assignments
subject to change
We may discuss
Blades for other chapters; it will be announced in class.
It may become necessary for changes to be made in the syllabus throughout
the semester. I will make these changes
both verbally and in writing on the course website. It is your responsibility to both attend class and check the
website for any changes.
Changes in due
dates for assignments will be announced in class and on Blackboard in either
the Assignment or Announcement section or both.
Case
presentations:
Students must solve the case studies using techniques from basic finance, statistics, or the concepts introduced in this course. Students are encouraged to work in groups of up to 3 people. One student group will present their solution in class and help lead the discussion. Other groups should hand in written solutions in the form of a business report to management; this report will consist of 3 typewritten pages (plus appendices). Written cases are due at the beginning of class on the day of discussion (see calendar on page 5). On February 12 or 26, each group will select which cases they will present. I will lead the discussion of the first case (Proctor & Gamble: Mexico 1991). All student groups will hand in written solutions for this case.
I will prepare suggested questions for each case and will put them in Blackboard in the Course Documents section.
Class participation is essential in the case discussions, and attendance is important. If you cannot attend a class on a case presentation day, please email or call me ahead of time.
Please put
the following information on the index card:
Course name or number
and Course section number (BUFN724, section DC06)
Your name
phone number (Home)
(Office) (cell)
e-mail address (in CAPS)
- very important - may send you class announcements in email - you may include
as many email addresses as you wish (home, work, school, etc.)
have you taken BUSI640
(or equivalent)? Accounting? Statistics?
employment - what do you
do? where? (or past internships or positions) -- optional
student number
Are you registered? Yes or no
WEB
SITES FOR FINANCIAL INFORMATION
Dr. Kiss home page http://bb.rhsmith.umd.edu
http://www.rhsmith.umd.edu/finance/elinda-kiss
Dr. Kiss Rutgers home page www.elinda-kiss.rutgers.edu
Wall Street Journal interactive edition http://interactive.wsj.com/pages/money.htm
http://finanance.swcollege.com website for text publisher
www.oanda.com exchange rate history
http://fx.sauder.ubc.ca/ http://fx.sauder.ubc.ca/data.html
http://pacific.commerce.ubc.ca/xr/
Full Big Mac Price
Index http://www.oanda.com/products/bigmac/bigm
implied currency volatilities
http://biz.yahoo.com/ifc
http://www.internationalist.com/business/
http://www.imf.org/external/pubs/ft/weo/2001/02/data/index.htm annual percentage change in inflation http://www1.oecd.org/std/ppps.htm OECD
and Eurostat on PPP http://www.federalreserve.gov/releases/H15/update/
interest rates
lcweb2.loc.gov/frd/cs/cshome.html www.stern.nyu.edu/-nroubini/asia/-AsiaHomepage.html http://www.stern.nyu.edu/globalmacro www.aisienhaus.org/links/crisis.htm www.nyse.com/public/intview/4b/4bix.htm http://www.cfr.org/public/pubs/mexican.html Mexican Peso Crisis of 1994
http://www.info.gov.hk/hkma/eng/currency/link_ex/index.htm Hong Kong currency Board
http://www.euro.ecb.int/en.html
http://www.oanda.com/site/euro.shtml
www.worldbank.org/data/wdi2000/pdfs/tab6_5.pdf
http://www.imfsite.org/origins/confer.html Bretton Woods and Smithsonian
agreements
http://www.cme.com/prices/index.com
the
Options Industry Council at
Bloomberg Financial
Services http://www.bloomberg.com/welcome.html www.bloomberg.com
CNN Financial News http://www.cnnfn.com/ Fair Value (futures contracts) http://cnnfn.cnn.com/1999/05/02/markets/fair_value/ http://cnnfn.cnn.com/2000/04/17/investing/fairvalue/ New York
Times http://www.nytimes.com New York Stock Exchange http://www.nyse.com/ NSADAQ/AMEX
http://www.nasdaq.com/ Chicago Board of Trade http://www.cbot.com/ Chicago Mercantile Exchange http://www.cme.com/ Single
European Act at
New
Basel Capital Accord (2001) at Philadelphia Stock Exchange http://www.phlx.com/ Janney Montgomery Scott invest. bank http://www.janneys.com/ Wachovia Bank http://www.wachovia.com/
PNC Bank http://www.pncbank.com/