国际财务管理 英文版答案.docx

国际财务管理 英文版答案.docx

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国际财务管理英文版答案

Chapter1

MultinationalFinancialManagement:

AnOverview

LectureOutline

ManagingtheMNC

FacingAgencyProblems

ManagementStructureofanMNC

WhyFirmsPursueInternationalBusiness

TheoryofComparativeAdvantage

ImperfectMarketsTheory

ProductCycleTheory

HowFirmsEngageinInternationalBusiness

InternationalTrade

Licensing

Franchising

JointVentures

AcquisitionsofExistingOperations

EstablishingNewForeignSubsidiaries

SummaryofMethods

ValuationModelforanMNC

DomesticModel

ValuingInternationalCashFlows

UncertaintySurroundinganMNC’sCashFlows

OrganizationoftheText

ChapterTheme

Thischapterintroducesthemultinationalcorporationashavingsimilargoalstothepurelydomesticcorporation,butawidervarietyofopportunities.Withadditionalopportunitiescomepotentialincreasedreturnsandotherformsofrisktoconsider.Thepotentialbenefitsandrisksareintroduced.

TopicstoStimulateClassDiscussion

1.WhatistheappropriatedefinitionofanMNC?

2.WhydoesanMNCexpandinternationally?

3.WhataretherisksofanMNCwhichexpandsinternationally?

4.WhydoyouthinkEuropeancountriesattractU.S.firms?

5.Whymustpurelydomesticfirmsbeconcernedabouttheinternationalenvironment?

POINT/COUNTER-POINT:

ShouldanMNCReduceItsEthicalStandardstoCompeteInternationally?

POINT:

Yes.WhenaU.S.-basedMNCcompetesinsomecountries,itmayencountersomebusinessnormstherethatarenotallowedintheU.S.Forexample,whencompetingforagovernmentcontract,firmsmightprovidepayoffstothegovernmentofficialswhowillmakethedecision.Yet,intheUnitedStates,afirmwillsometimestakeaclientonanexpensivegolfoutingorprovideskyboxticketstoevents.Thisisnodifferentthanapayoff.Ifthepayoffsarebiggerinsomeforeigncountries,theMNCcancompeteonlybymatchingthepayoffsprovidedbyitscompetitors.

COUNTER-POINT:

No.AU.S.-basedMNCshouldmaintainastandardcodeofethicsthatappliestoanycountry,evenifitisatadisadvantageinaforeigncountrythatallowsactivitiesthatmightbeviewedasunethical.Inthisway,theMNCestablishesmorecredibilityworldwide.

WHOISCORRECT?

UsetheInternettolearnmoreaboutthisissue.Whichargumentdoyousupport?

Offeryourownopiniononthisissue.

ANSWER:

Theissueisfrequentlydiscussed.ItiseasytosuggestthattheMNCshouldmaintainastandardcodeofethics,butinreality,thatmeansthatitwillnotbeabletocompeteinsomecases.Forexample,evenifitsubmitsthelowestbidonaspecificforeigngovernmentproject,itwillnotreceivethebidwithoutapayofftotheforeigngovernmentofficials.Theissueisespeciallyaconcernforlargeprojectsthatmaygeneratesubstantialcashflowsforthefirmthatischosentodotheproject.Ideally,theMNCcanclearlydemonstratetowhoeveroverseesthedecisionprocessthatitdeservestobeselected.Ifthereisjustonedecision-makerwithnooversight,anMNCcannotensurethatthedecisionwillbeethical.Butifthedecision-makermustbeaccountabletoadepartmentwhooverseesthedecision,theMNCmaybeabletopromptthedepartmenttoensurethattheprocessisethical.

AnswerstoEndofChapterQuestions

1.AgencyProblemsofMNCs.

a.ExplaintheagencyproblemofMNCs.

ANSWER:

Theagencyproblemreflectsaconflictofinterestsbetweendecision-makingmanagersandtheownersoftheMNC.Agencycostsoccurinanefforttoassurethatmanagersactinthebestinterestoftheowners.

b.WhymightagencycostsbelargerforanMNCthanforapurelydomesticfirm?

ANSWER:

TheagencycostsarenormallylargerforMNCsthanpurelydomesticfirmsforthefollowingreasons.First,MNCsincurlargeragencycostsinmonitoringmanagersofdistantforeignsubsidiaries.Second,foreignsubsidiarymanagersraisedindifferentculturesmaynotfollowuniformgoals.Third,thesheersizeofthelargerMNCswouldalsocreatelargeagencyproblems.

2.ComparativeAdvantage.

a.Explainhowthetheoryofcomparativeadvantagerelatestotheneedforinternationalbusiness.

ANSWER:

Thetheoryofcomparativeadvantageimpliesthatcountriesshouldspecializeinproduction,therebyrelyingonothercountriesforsomeproducts.Consequently,thereisaneedforinternationalbusiness.

b.ExplainhowtheproductcycletheoryrelatestothegrowthofanMNC.

ANSWER:

Theproductcycletheorysuggeststhatatsomepointintime,thefirmwillattempttocapitalizeonitsperceivedadvantagesinmarketsotherthanwhereitwasinitiallyestablished.

3.ImperfectMarkets.

a.Explainhowtheexistenceofimperfectmarketshasledtotheestablishmentofsubsidiariesinforeignmarkets.

ANSWER:

Becauseofimperfectmarkets,resourcescannotbeeasilyandfreelyretrievedbytheMNC.Consequently,theMNCmustsometimesgototheresourcesratherthanretrieveresources（suchasland,labor,etc.）.

b.Ifperfectmarketsexisted,wouldwages,prices,andinterestratesamongcountriesbemoresimilarorlesssimilarthanunderconditionsofimperfectmarkets?

Why?

ANSWER:

Ifperfectmarketsexisted,resourceswouldbemoremobileandcouldthereforebetransferredtothosecountriesmorewillingtopayahighpriceforthem.Asthisoccurred,shortagesofresourcesinanyparticularcountrywouldbealleviatedandthecostsofsuchresourceswouldbesimilaracrosscountries.

4.InternationalOpportunities.

a.DoyouthinktheacquisitionofaforeignfirmorlicensingwillresultingreatergrowthforanMNC?

Whichalternativeislikelytohavemorerisk?

ANSWER:

Anacquisitionwilltypicallyresultingreatergrowth,butitismoreriskybecauseitnormallyrequiresalargerinvestmentandthedecisioncannotbeeasilyreversedoncetheacquisitionismade.

b.Describeascenarioinwhichthesizeofacorporationisnotaffectedbyaccesstointernationalopportunities.

ANSWER:

Somefirmsmayavoidopportunitiesbecausetheylackknowledgeaboutforeignmarketsorexpectthattherisksareexcessive.Thus,thesizeofthesefirmsisnotaffectedbytheopportunities.

c.ExplainwhyMNCssuchasCocaColaandPepsiCo,Inc.,stillhavenumerousopportunitiesforinternationalexpansion.

ANSWER:

CocaColaandPepsiCostillhavenewinternationalopportunitiesbecausecountriesareatvariousstagesofdevelopment.SomecountrieshavejustrecentlyopenedtheirborderstoMNCs.Manyofthesecountriesdonotoffersufficientfoodordrinkproductstotheirconsumers.

5.InternationalOpportunitiesDuetotheInternet.

a.Whatfactorscausesomefirmstobecomemoreinternationalizedthanothers?

ANSWER:

Theoperatingcharacteristicsofthefirm（whatitproducesorsells）andtheriskperceptionofinternationalbusinesswillinfluencethedegreetowhichafirmbecomesinternationalized.Severalotherfactorssuchasaccesstocapitalcouldalsoberelevanthere.Firmsthatarelabor-intensivecouldmoreeasilycapitalizeonlow-wagecountrieswhilefirmsthatrelyontechnologicaladvancescouldnot.

b.OfferyouropiniononwhytheInternetmayresultinmoreinternationalbusiness.

ANSWER:

TheInternetallowsforeasyandlow-costcommunicationbetweencountries,sothatfirmscouldnowdevelopcontactswithpotentialcustomersoverseasbyhavingawebsite.Manyfirmsusetheirwebsitetoidentifytheproductsthattheysell,alongwiththepricesforeachproduct.Thisallowsthemtoeasilyadvertisetheirproductstopotentialimportersanywhereintheworldwithoutmailingbrochurestovariouscountries.Inaddition,theycanaddtotheirproductlineandchangepricesbysimplyrevisingtheirwebsite,soimportersarekeptabreastoftheexporter’sproductinformationbymonitoringtheexporter’swebsiteperiodically.Firmscanalsousetheirwebsitestoacceptordersonline.Somefirmswithaninternationalreputationusetheirbrandnametoadvertiseproductsovertheinternet.Theymayusemanufacturersinsomeforeigncountriestoproducesomeoftheirproductssubjecttotheirspecification

6.ImpactofExchangeRateMovements.PlakCo.ofChicagohasseveralEuropeansubsidiariesthatremitearningstoiteachyear.Explainhowappreciationoftheeuro（thecurrencyusedinmanyEuropeancountries）wouldaffectPlak’svaluation.

ANSWER:

Plak’svaluationshouldincreasebecausetheappreciationoftheeurowillincreasethedollarvalueofthecashflowsremittedbytheEuropeansubsidiaries.

7.BenefitsandRisksofInternationalBusiness.Asanoverallreviewofthischapter,identifypossiblereasonsforgrowthininternationalbusiness.Then,listthevariousdisadvantagesthatmaydiscourageinternationalbusiness.

ANSWER:

Growthininternationalbusinesscanbestimulatedby

（1）accesstoforeignresourceswhichcanreducecosts,or

（2）accesstoforeignmarketswhichboostrevenues.Yet,internationalbusinessissubjecttorisksofexchangeratefluctuations,andpoliticalrisk（suchasapossiblehostgovernmenttakeover,taxregulations,etc.）.

8.ValuationofanMNC.HudsonCo.,aU.S.firm,hasasubsidiaryinMexico,wherepoliticalriskhasrecentlyincreased.Hudson’sbestguessofitsfuturepesocashflowstobereceivedhasnotchanged.However,itsvaluationhasdeclinedasaresultoftheincreaseinpoliticalrisk.Explain.

ANSWER:

ThevaluationoftheMNCisthepresentvalueofexpectedcashflows.Theincreaseinriskresultsinahigherexpectedreturn,whichreducesthepresentvalueoftheexpectedfuturecashflows.

9.CentralizationandAgencyCosts.WouldtheagencyproblembemorepronouncedforBerkleyCorp.,whichhasitsparentcompanymakemostmajordecisionsforitsforeignsubsidiaries,orOaklandCorp.,whichu