The overall goal of the course it to provide the participants with a sound understanding of financial decision-making in the multinational firm. However, whilst the course is presented from a managerial perspective and thus applied in nature, decision-making is approached using firmly established theories in economics and finance. The aim of the course is threefold: i) to study the laws that play a crucial role in the international economy and global financial markets; ii) to understand how firms can hedge exchange rate risk related to both their operations and strategic decisions; and iii) to study issues in corporate finance such as capital budgeting and capital structure from a domestic perspective. The course will give an introduction on how to deal in a systematic way with the link between sustainability and cash flows and sustainability and discount rates.
- Introduction: Globalization and the Multinational Firm
- The International Monetary System: FX-rate quotation, Foreign Exchange Market, Balance of payments, FX-rate regimes
- Parity Relationships: covered and uncovered interest parity, purchasing power parity, international Fisher effect, carry trading
- Currency Futures and Options for Hedging
- Transaction (contractual) Exposure: financial hedging with derivatives, special hedging problems, alternative hedging approaches
- Operating Exposure: reclassification of financial statements, measurement of linear vs non-linear exposure, financial hedging with derivatives, operational hedging.
- Domestic Capital Structure: Modigliani-Miller theorems I and II without taxes, and with taxes.
- International Capital Structure and the Cost of Capital: the role currency risk and debt financing from the perspective of a multinational corporation.
- Net Present Value (NPV): theoretical foundations, practical adjustment in presence of political risk in international investments.
- Domestic Capital Budgeting: Weighted Average Cost of Capital (WACC), Adjusted Present Value (APV), and Flow to Equity approach (FTE).
- International Capital Budgeting: the role of royalties, cross-border dividend payments, cannibalization of exports, and financial-side effects in an international environment.
This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.