Dr. Robert M. Eldridge
Seabury Hall 304
Tel: 203-392-5628 (O); 203-876-5046 (H)
email: ELDRIDGER1@SOUTHERNCT.EDU
Fax: 203-392-5254

1. Fundamentals of Multinational Financial Management, 5th edition, Alan C. Shapiro, John Wiley & Sons, 2005
2. Subscription to the Financial Times of London.

There are two objectives of this course:

1. Establish a foundation in the context of 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.

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 8% 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 particular 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, you will need to visit the Disability Resource Office, EN B222, to arrange for approved accommodations. If you have other information you wish to share with me, such as emergency medical information, or arrangements in case the building has to be evacuated, please tell me as soon as possible.

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

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.

J. If you use a direct quotation, be sure to put it in quotes and properly reference it. If not so done, you will have committed plagiarism - the worst academic sin - and suffer accordingly.

7. Writing assignments. The five papers assigned constitute the writing assignments for the course. Two grades will be assigned for each paper: 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 rewrite, 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.

8. I have developed a phobia: cell phones/pagers/other personal communications devices that go off in class. To maintain good diplomatic relations with me, please turn off all such devices in the classroom. NO EXCEPTIONS UNLESS PREVIOUSLY APPROVED BY ME.

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.

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.

Country Risk Analysis

Webex: 5:1,2; 6:1,2 Prob: 5:1,4

Webex:7:1,2,3; Prob:7:1,2,3; Webex: 2:1,2,3,4; Prob: 2:1,2

Apr 6

Catch-up/Review

Webex:16:2; Prob 16:2,3,4 Paper 5 due.

Special Purpose Financing Vehicles

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. A good reference with which to start is "Exchange Arrangements and Exchange Restrictions", K4440.A13157 and "International Financial Statistics" HG3881.I6262 in the library.

Track one of the European"legacy currencies" for the five year period ending 30 June 1999.

1. Using Datastream, plot out the exchange rate:

a. Vs the US dollar

b. Vs sterling

c. Against the interest rate differentials:

1. Dollar exchange rate vs dollar interest rate differential

2. Sterling exchange rate vs sterling interest rate differential

2. Plot the interest rates for your country, the UK and the US. Plot the differential in interest rates. (I will show you how). For the UK use 3 month Sterling LIBOR. For the US use 3 month FED FUNDS. Both are available on Datastream. For the country you have chosen, select the interest rate that most corresponds to the US/UK 3 month rate. It may be that there is no equivalent rate. In that case talk to me

3. Discuss whether or not interest rate changes seem to influence the exchange rate.

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 the Standard & Poor's and Moody's rating service, and the ratings contained in the semi-annual survey (March and Sept) reported in Institutional Investor.

• Standard & Poor's (www.standardpoor.com/ratings)
• Moody's (www.moodys.com)
• Michigan State University (www.globaledge.msu.edu/ibrd/ibrd.asp)
  

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 underdeveloped and "emerging" markets".

• World Bank (www.worldbank.org)
• OECD (www.oecd.org)
• European Bank for Reconstruction (www.ebrd.com)

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? (www.opic.gov)

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) General Electric Capital Services (www.ge.com)
iii) 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/english/index.asp)
• ChinaNet Investment Pages (www.business-china.com/invest)

Select from one of the following topics:
A. The creation of the Euro. Trace its origin starting with the Maastricht Treaty, through the Euro Stability Pact and the European Central Bank. Discuss the benefits and disadvantages of a single currency for 25 countries. What problems did the 2004 enlargement of the European Union create for the euro.

B. What is meant by this term "globalization". What is it and how is it manifested. How is it impacted by trade agreements such as NAFTA and Mercosur. Is globalization good, bad or indifferent. What regulatory issues does globalization create.

C. Consider the United States trade position. With whom does the US have its largest trade deficits; with whom the largest surpluses. How are trade relations related to the trade-weighted dollar.

D. Congress has passed a one year reduction in US taxes on foreign profits of US multinationals. (see the "New York Times", 1 Feb 2005, page C1.) You are the CFO of a large US multinational with $20 billion in profits stored off-shore. What would you do with the repartriated money? What was the intent of Congress in passing this bill.

E. Consider the transnational firm. What does the term mean? How does the transnational differ from a multinational? What regulatory issues are created by the existence of transnationals.