SOUTHERN CONNECTICUT STATE UNIVERSITY
DEPARTMENT OF ECONOMICS AND FINANCE
SUMMER 2001
WEATHER CHECK NUMBER: (203) 392-5520
COURSE NO. FIN 347L-01/347-02
COURSE TITLE: INTERNATIONAL FINANCIAL MANAGEMENT
COURSE DESCRIPTION: A study of the financial issues facing a firm operating in a multinational environment. Topics include: balance of payments concepts, exchange rate theories, currency markets,corporate treasury management, capital budgeting,
international cost of capital, risk management, derivatives, security markets and their valuation.
PREREQUISITES: FIN 300
PROFESSOR: Dr. Robert M. Eldridge. Tel: 392-5628 (O);
876-5046 (H); email: ELDRIDGE_R@SCSU.CTSTATEU.EDU
OFFICE HOURS: Monday-Thursday 1530-1730, SEA304.
CLASS HOURS: Monday-Thursday 1800-2000. MO 8
MATERIALS:
1. Required:
A) Multinational Financial Management, 6th edition.
Alan C. Shapiro, John Wiley and Sons, 1999
B) Subscription to the Financial Times of London.
Course Objectives: There are two objectives of this course:
(1) Establish a foundation in the concept for-profit financial operations in the international area as outlined in the course description. At the end of the course, the student should have an appreciation of the basic issues facing the financial manager operating in the international environment. (2) provide the student an opportunity to practice good writing skills as learned in basic composition courses.
METHOD OF INSTRUCTION: The method of instruction will be primarily lectures and problems from the textbook and the
world-wide-web.
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METHOD OF GRADING:
1. 5 papers, minimum 5 pages each @ 15% 75%
2. "Two minute drills" 10%
3. Ethics questions 10%
4. Participation and attendance 5%
__________
Total 100%
SPECIAL NOTES:
1. This course will be offered as both a "L and non-"L" course,
although the assignments will be identical. The one difference will be that non-"L" registrants will not be required to rewrite their papers to meet writing standards.
2. "Two minute drills". Generally, at the end of each class, there will be a one-question quiz lasting two minutes. I will count only the top ten grades. This will constitute 10% of the final grade.
3. At the end of the course, the student will be requested to complete a "Course Survey" form, separate and distinct from any University Evaluation form. This survey helps me in preparing the course for the next time I offer it. For each form returned, 1/n points will be added to the final grade, where "n" represents the number of students enrolled in the course based on the registrar's final class list.
4. The student is permitted and encouraged to tape record lectures for personal study use only.
5. If any student has a disability-related need in order to participate in this course, such as: special seating, note-taking assistance, use of tape recorders or modified exam conditions,
please let me know as soon as possible so that appropriate accommodations can be made.
6. Some thoughts on writing: I do not expect Nobel-prize quality literature (or even Pulitzer prize quality for that matter). I do expect the following:
A. Each sentence must have a subject and verb.
B. Subject and verb must agree in number.
C. All words should be properly spelled. There is no excuse
for misspelling. I will accept either British or American
spelling.
D. Indefinite pronouns must agree in number with the proper
nouns to which they apply.
E. Company names are often Compound Singular Nouns (example:
Lever Bros)and therefore take singular pronouns (it).
F. Thou shalt not:
1. Leave a dangling participle.
2. Leave a dangling preposition.
3. Split an infinitive
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G. Unless requested to do so, do not write from the
perspective of the first person singular.
H. Basic punctuation is expected, especially the use of
apostrophes for the possessive.
I. Use of the verb "to go" as a surrogate for the verb "to
say" will cause me to instantaneously dematerialize
and most likely haunt your speech/writing patterns for the
rest of your life. In a similar fashion, the word "like" is
not salt or sugar, to be casually sprinkled into your
speech/writing habits. It, too, will cause me untold grief
and torment and both errors will most likely guide my
marking pen when making out grades.
7. Writing assignments. The five cases assigned constitute the writing assignments for the course. Two grades will be assigned for the cases: one for finance and one for writing. For those students taking this as a "L" course, I will get the first submission back to you two classes after submission. Any grade for writing below B will necessitate a rewrite. Failure to rewrite will result in a failing grade for the writing portion of the assignment. Any rewrites required must be resubmitted by the second following class. Papers will be rewritten only once. After the first re-write, the grade for the writing and finance stands. For those taking this as a non-"L" course, I will give you a chance to redo the finance portion once; however, this will not be required. The final grade for each assignment will be based on
50% finance and 50% writing for "L" course students and 75% finance and 25% writing for non-"L" students. In writing your assignments, bear this in mind: If the reader does not understand what you have written, you might as well not have written it. Of particular concern are ambiguities that could be interpreted in more than one way. Make sure that your writing is clear and specific.
EXPECTATIONS:
A. What you may expect from me:
1. A strong grounding in basic international finance.
2. A willingness to work with you on specific problems
you have with the course or its scheduling.
3. A sense of excitement about the field of international
finance.
B. What I expect to get from you:
1. Come to class prepared by having read the assignment and
at least tried any homework problems.
2. If you know you will miss a class, a call to me would be
appreciated.
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3. If something does not make sense you will ask me either
in class, in office hours or call me at home.
4. A sense of what is going on in the world of international
business and finance through a daily reading of the
Financial Times.
ASSIGNMENT SCHEDULE
Date Chapter Topic Remarks
July 02 1 Introduction
03 3
05 4
09 2 Paper 1 due
Tutorial on
Datastream in
the library
after class
10 5
11 7
12 13 Paper #2 due
16 21 Paper #3 due
17 18
18 20
19 8
23 9 Paper #4 due
24 10
25 11
26 22
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30 12 Paper #5 due
31 14
Aug 01 15
02 19
Paper #1: Select a foreign currency (except the Euro)
1. Discuss the nature of the exchange rate regime
of the currency.
2. Discuss it's Balance of Payments situation over the
last five years.
3. Discuss what you believe are the major factors
driving it's exchange rate against the US dollar.
Consider political and economic factors.
Paper #2: Track one of the european "legacy currencies" for
the five year period ending 30 June 2001.
1. Plot out the exchange rate:
a. vs the US dollar
b. vs sterling
2. Plot the interest rates for your country, the UK and
the US. Plot the differential in interest rates. (I
will show you how).
3. Discuss whether or not interest rate changes seem to
influence the exchange rate before and after the
currency became a "legacy".
Paper #3: Case study 1.3 (page 256 in text) or 1.4 (page 257).
Half of the class will do case 1.3 and the other half
of the class will do 1.4.
Paper #4: This paper will be based on material found on the web.
Each student will be assigned one of the following
issues:
a) Using the following web sites (and others you may
find) prepare a report on the following question:
Is capital generated in the industrialized countries
finding its way to under-developed and "emerging"
markets".
World Bank : www.worldbank.org
OECD : www.ebrd.org
European Bank for Reconstruction:
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b) The Overseas Private Investment Corp provides
long-term political risk insurance and limited-
recourse project financing aid to US-based firms
investing abroad. Using the following web site
(and any others you find) address the following
issues:
i) Exactly what types of risk will OPIC insure
against?
ii) What financial limits are there on this
insurance protection?
iii) How should a project be structured to aid its
approval by OPIC for coverage?
iv) How is OPIC funded?
v) Who "owns" OPIC?
c) Using the web sites listed below, prepare a report
on project financing services available from the
listed organizations:
i) Milbank: Project Finance:
www.milbank.com/03_practice12.html
ii) First Chicago Capital Markets: fccm.com
iii) Nomura Project Finance International:
npfi.com.hk
iv) General Electric Capital Services:
www.ge.com/gec
v) World Bank: www.worldbank.org
d) China is potentially the world's largest consumer,
as well a potential place of foreign direct
investment. Prepare a report that develops a data
base on sources of information on such issues as:
import/export restrictions; labor relations;
supplier financing; tax rules; depreciation
schedules; currency properties and restrictions and
sources of short- and long-term debt. Use the
following web sites as a starter:
Ministry of Foreign Trade and Economic
Cooperation, PRC: www.chinamarket.com.cn
China Investment Trust & Investment Corporation:
www.citic.com
ChinaNet Investment Pages:
www.business-china.com/invest
Paper #5 Using the below listed web sites, select a country and do an analysis of it's sovereign risk characteristics (such
as local currency risk, default risk, transfer risk, currency risk). Your analysis should use both the Standard & Poor's rating
service as well as Moody's as well as the ratings contained in
the annual survey reported in Institutional Investor.
Standard & Poor's www.standardpoor.com/ratings
Moody's www.moodys.com