《财务管理基础》英文课件ch24.ppt

Chapter 24 International Financial Management After studying Chapter 24, you should be able to: Explain why many firms invest in foreign operations. Explain why foreign investment is different from domestic investment. Describe how capital budgeting, in an international environment, is similar or dissimilar to that in a domestic environment. Understand the types of exchange-rate exposure and how to manage exchange-rate risk exposure. Compute domestic equivalents of foreign currencies given the spot or forward exchange rates. Understand and illustrate the purchasing-power parity (PPP) and interest rate parity. Describe the specific instruments and documents used in structuring international trade transactions. Distinguish among countertrade, export factoring, and forfaiting. International Financial Management Some Background Types of Exchange-Rate Risk Exposure Management of Exchange-Rate Risk Exposure Structuring International Trade Transactions Some Background Fill product gaps in foreign markets where excess returns can be earned. To produce products in foreign markets more efficiently than domestically. To secure the necessary raw materials required for product production. International Capital Budgeting 1. Estimate expected cash flows in the foreign currency. 2. Compute their U.S.-dollar equivalents at the expected exchange rate. 3. Determine the NPV of the project using the U.S. required rate of return, with the rate adjusted upward or downward for any risk premium effect associated with the foreign investment. International Capital Budgeting Only consider those cash flows that can be “repatriated” (returned) to the home-country parent. The exchange rate is the number of units of one currency that may be purchased with one unit of another currency. For example, the current exchange rate might be 2.50 Freedonian marks per one U.S. dollar. International Capital Budgeting Example A firm is considering an investment in Freedonia, and the initial cash outlay i