University of Notre Dame

Mendoza College of Business

Department of Finance

FIN 70500 – Multinational Financial Management

Module 1, Fall, 2006

Instructor: Jerry G. Langley Phone: Office - (574) 631-6078

Office: 262 MCOB Home - (574) 234-1191 (before10PM)
E-mail: Jerry.Langley.3@nd.edu
Office hours: I’m in my office most of the week, so stop by or call and set up a time to see me.

COURSE OBJECTIVES
This course covers various aspects of the international side of finance, including organizational issues that impact
the financial decision-making process. After an overview of the international financial environment companies
operate in, we will learn how they organize themselves to do business internationally, the impact of volatile
exchange rates and how they can be measured and managed to minimize effects on economic and reported results.

In addition to looking at the theoretical underpinnings of international finance, we will also cover the practical side
of financing decisions – how corporations actually use these tools to manage the potential impacts on their business
that come from operating around the world. We’ll also see how making international financing decisions is an
integrative process, requiring input from the accounting, tax and legal experts to make sure overall corporate
objectives are met, especially for public companies.

Although not covered as a separate topic, we will also be mindful of ethical issues surrounding the various areas of
international business we’ll study, such as the pressures faced by foreign employees – the agency issue; and
appropriate business practices when doing business abroad, including the Foreign Corrupt Practices Act and
compliance with local country customs, practices and regulations, with emphasis on adherence to financial
reporting and tax obligations.

REQUIRED TEXT
Jeff Madura, International Financial Management, 8th Edition, South-Western College Publishing, 2006. There is a
student CD that comes with the text that includes PowerPoint lecture outlines/chapter summaries, Excel
spreadsheets to help with end-of-chapter questions, etc. Also, there is a website for the text that has additional
resources for you – quizzes, references, etc.

FINANCIAL CALCULATOR
A financial calculator is also required, capable of discounting cash flows to present value (PV) and calculating
internal rates of return (IRR).

CLASS PREPARATION
Chapter assignments are listed on the attached syllabus, grouped by topic area. I will give a lecture for each broad
topic and you should read the assigned chapter(s) before class. We will use the listed questions at the end of the
chapter as the basis for class discussion, so come prepared to contribute. This will also help you with the Blades
case at the end of each chapter (see below). Doing the self-tests at the end of each chapter (answers in Appendix A)
will help reinforce what you’ve read, as well.
CLASS PARTICIPATION
Class participation counts for 7.5% of your grade and points will be awarded in this area based on the quality of
your participation in class, presentations on assigned cases, and your level of participation as a team member.
ONGOING CASE – BLADES, INC.
Madura has included an ongoing case at the end of each chapter for a company called Blades, Inc., a U.S.
manufacturer of roller blades. By following the same company throughout the course and seeing how it makes
international financing decisions in the areas we’re covering, you should develop a good understanding of the
challenges a company faces as it grows internationally. As you will see, you will be taking on the role of financial
analysts for Blades and will be reporting to Ben Holt, the CFO of the company, on various assignments that he
gives you to help him make decisions on issues facing the company as it moves into the international marketplace.
The class will be divided into several teams and each team will have the opportunity to present and facilitate
discussion of one of the Blades cases in class.

In addition, each team will be required to turn in 3 Blades write-ups, as noted on the class schedule. These write-
ups will count for 30% of your final grade and I will be assessing them as I would if you were reporting to me in
the real business world. Thought, consistency, logic and professionalism will be my guides in grading each team’s
work. You will find that the numerical analyses are relatively straightforward and, in many cases, there is no
specific "right" or "wrong" answer for the questions asked. Much of the grade will be based on clarity of
presentation and how well you support your recommendations to Ben. (Note – all teams should work independently
on these cases; doing otherwise will constitute a breach of the honor code. In addition, all team members are
expected to share the workload and it is each member’s responsibility to see that this occurs.)

EXAMS
One mid-term quiz and a final exam will be given and will cover all assigned material, as well as anything
discussed in class. The exams will consist of multiple choice, true-false and short problems/essay questions,
similar to those covered in class. Each exam will be given on a closed book basis and you should bring your
calculator to the exam. In addition, you may bring an 8-1/2”x11” “cheat sheet” to each exam. Cram anything onto
this sheet you think might be helpful to you – definitions, formulas, problems, etc.

GRADES Points
Exams – 62.5%
- mid-term quiz 50
- final exam 75

Blades, Inc. case write-ups – 30%

(3 at 20 points each) 60

Class participation – 7.5% 15

Total Possible 200

The following conversion from numerical to letter grades will be used, based on total points earned during the
semester:
Percentage Points Letter Grade
93 – 100 186 – 200 A
90 - 92 180 – 185 A-
87 – 89 174 – 179 B+
83 – 86 166 – 173 B
80 – 82 160 – 165 B-
77 – 79 154 – 159 C+
73 – 76 146 – 153 C
70 – 72 140 – 145 C-
67 – 69 134 – 139 D+
63 – 66 126 – 133 D
60 – 62 120 – 125 D-
0 – 59 0 – 119 F
 FIN 70500 – Multinational Financial Management
Module 1, Fall, 2006

Topic Chapter(s) End of chapter questions/Blades turn in

The International Financial Environment

Mon., 8/21 - risks and rewards 1 11,17,19 (no Blades)
Wed., 8/23 - international organization structures
Mon., 8/28 - flow of funds 2 2,8,11
- foreign exchange market 3 (pp. 57-71) 4,6,11,18
- direct foreign investment (DFI) 13 2,5,9,12,15

Wed., 8/30 Exchange Rates

Mon., 9/4 - determination 4 2,3,4,9,15,19 - Turn in Blades, chapter 4
Wed., 9/6 - government influences 6 5,9,15,18
Mon., 9/11 - arbitrage and interest rate parity 7 2,6,11,15
- inflation, interest rates and exchange rates 8 4,7,10,18,22, 24, 25

Wed., 9/13 Midterm quiz (first 1/2 of class)

Mon., 9/18 Corporate Exposures to Exchange Rates 10 1,6,10,13,21,25
- transaction, translation, economic exposures

Mon., 9/18 Managing/Hedging Exchange Rate Exposures

Wed., 9/20 - derivatives 5 (pp. 117-139) 5,6,16,23 (no Blades)
- hedging techniques using financial markets 11 2,3,7,8,9,24,32(a) - Turn in Blades, chapter 11
- hedging via business strategies 12 1,2,11,13

Mon., 9/25 Multinational capital budgeting 14 3,4,6,9,10,11,17,24 – Turn in Blades, chapter 14*

Wed., 9/27 International trade finance 19 1,2,14

Financing considerations (if time permits)
- short-term financing 20 1,2,5,6,8,11,13,15
- long-term financing 18 6,7,8,11

Mon., 10/2 Final Exam (in class)

* Note: Chapter 14 Blades – the case is a bit confusing, especially in the top paragraph of the right hand column on p. 439. Assume that if the contract is renewed, Blades will
sell 300,000 pairs in the first year (of which 180,000 completes the existing contract with Entertainment Products (EP)), 300,000 the second year, and then 400,000 per year after
that. If the contract is not renewed, they will still sell 180,000 in the first year to EP, plus 120,000 to others, then 125,000 the second year (of which 5,000 goes to EP), and then
225,000 per year after that. Also, after the first year, all Speedos sold in Thailand will be manufactured in Thailand.