第三十二章 跨国公司财务

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1、McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-0Chapter Outline32.1 Terminology32.2 Foreign Exchange Markets and Exchange Rates32.3 The Law of One Price and Purchasing Power Parity32.4 Interest Rates and Exchange Rates:Interest Rate Parity32.5 International C

2、apital Budgeting32.6 International Financial Decisions32.7 Reporting Foreign Operations32.8 Summary and ConclusionsMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-132.1 Terminology American Depository Receipt(ADR):a security issued in the U.S.to represent shar

3、es of a foreign stock.Cross rate:the exchange rate between two foreign currencies,e.g.the exchange rate between and.Euro():the single currency of the European Monetary Union which was adopted by 11 Member States on 1 January 1999.These member states are:Belgium,Germany,Spain,France,Ireland,Italy,Lux

4、emburg,Finland,Austria,Portugal and the Netherlands.Eurobonds:bonds denominated in a particular currency and issued simultaneously in the bond markets of several countries.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-232.1 Terminology Eurocurrency:money dep

5、osited in a financial center outside the home country.Eurodollars are dollar deposits held outside the U.S.;Euroyen are yen denominated deposits held outside Japan.Foreign bonds:bonds issued in another nations capital market by a foreign borrower.Gilts:British and Irish government securities.LIBOR:t

6、he London Interbank Offer Rate is the rate most international banks charge on another for loans of Eurodollars overnight in the London market.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-332.2 Foreign Exchange Markets and Exchange Rates Without a doubt the

7、foreign exchange market is the worlds largest financial market.In this market one countrys currency is traded for anothers.Most of the trading takes place in a few currencies.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-4FOREX Market Participants The FOREX

8、market is a two-tiered market:Interbank Market(Wholesale)About 700 banks worldwide stand ready to make a market in Foreign exchange.Nonbank dealers account for about 20%of the market.There are FX brokers who match buy and sell orders but do not carry inventory and FX specialists.Client Market(Retail

9、)Market participants include international banks,their customers,nonbank dealers,FOREX brokers,and central banks.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-5Correspondent Banking Relationships Large commercial banks maintain demand deposit accounts with o

10、ne another which facilitates the efficient functioning of the forex market.International commercial banks communicate with one another with:SWIFT:The Society for Worldwide Interbank Financial Telecommunications.CHIPS:Clearing House Interbank Payments System ECHO Exchange Clearing House Limited,the f

11、irst global clearinghouse for settling interbank FOREX transactions.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-6Spot Rate Quotations The spot market is the market for immediate delivery.(Settlement is due within two days.)Direct quotation the U.S.dollar e

12、quivalent e.g.“a Japanese Yen is worth about a penny”Indirect Quotation the price of a U.S.dollar in the foreign currency e.g.“you get 100 yen to the dollar”McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-7Spot FX trading In the interbank market,the standard s

13、ize trade is about U.S.$10 million.A bank trading room is a noisy,active place.The stakes are high.The“long term”is about 10 minutes.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-8Cross Rates Suppose that SDM(0)=.50 i.e.$1=2 DM in the spot market and that S(

14、0)=100 i.e.$1=100 What must the DM/cross rate be?50 DM1or .02 )0(5011$21001$,$since/DMSDMDMDMDMDMMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-9Triangular Arbitrage$Credit Lyonnais S(0)=1.50Credit AgricoleS/(0)=85BarclaysS(0)=120Suppose we observe these bank

15、s posting these exchange rates.First calculate the implied cross rates to see if an arbitrage exists.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-10Triangular Arbitrage$Credit Lyonnais S(0)=1.50Credit AgricoleS/(0)=85BarclaysS(0)=120The implied S(/)cross ra

16、te is S(/)=80Credit Agricole has posted a quote of S(/)=85 so there is an arbitrage opportunity.8011201$1$50.1So,how can we make money?McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-11Triangular Arbitrage$Credit Lyonnais S(0)=1.50Credit AgricoleS/(0)=85Barcla

17、ysS(0)=120As easy as 1 2 3:1.Sell our$for,2.Sell our for,3.Sell those for$.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-12Triangular ArbitrageSell$100,000 for at S(0)=1.50receive 150,000 Sell our 150,000 for at S/(0)=85 receive 12,750,000Sell 12,750,000 for

18、$at S(0)=120receive$106,250profit per round trip=$106,250-$100,000=$6,250McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-13The Forward Market A forward contract is an agreement to buy or sell an asset in the future at prices agreed upon today.If you have ever

19、had to order an out-of-stock textbook,then you have entered into a forward contract.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-14Forward Rate Quotations The forward market for FOREX involves agreements to buy and sell foreign currencies in the future at p

20、rices agreed upon today.Bank quotes for 1,3,6,9,and 12 month maturities are readily available for forward contracts.Longer-term swaps are available.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-15Forward Rate Quotations Suppose you observe that for Japanese

21、yen,the spot rate is 115.75=$1.00While the 180-day forward rate is 112.80=$1.00 Whats up with that?The forex market clearly thinks that the yen is going to be worth more in six months(the yen is expected to appreciate)because one dollar will buy fewer yen.McGraw-Hill/IrwinCopyright 2002 by The McGra

22、w-Hill Companies,Inc.All rights reserved.32-16Long and Short Forward Positions If you have agreed to sell anything(spot or forward),you are“short”.If you have agreed to buy anything(forward or spot),you are“long”.If you have agreed to sell forex forward,you are short.If you have agreed to buy forex

23、forward,you are long.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-1732.3 The Law of One Price and Purchasing Power Parity The exchange rate between two currencies should equal the ratio of the countries price levels.S(0)=P$P Relative PPP states that the rat

24、e of change in an exchange rate is equal to the differences in the rates of inflation.e=$-If U.S.inflation is 5%and U.K.inflation is 8%,the pound should depreciate by 3%.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-18Evidence on PPP PPP probably doesnt hold

25、 precisely in the real world for a variety of reasons.Haircuts cost 10 times as much in the developed world as in the developing world.Film,on the other hand,is a highly standardized commodity that is actively traded across borders.Shipping costs,as well as tariffs and quotas can lead to deviations

26、from PPP.PPP-determined exchange rates still provide a valuable benchmark.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-1932.4 Interest Rates and Exchange Rates:Interest Rate Parity IRP is an arbitrage condition.If IRP did not hold,then it would be possible

27、for an astute trader to make unlimited amounts of money exploiting the arbitrage opportunity.Since we dont typically observe persistent arbitrage conditions,we can safely assume that IRP holds.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-20Interest Rate Par

28、ity DefinedSuppose you have$100,000 to invest for one year.You can either 1.Invest in the U.S.at i$.2.Future value=$100,000(1+ius)2.Trade your dollars for yen at the spot rate,invest in Japan at i and hedge your exchange rate risk by selling the future value of the Japanese investment forward.Future

29、 value=$100,000(F/S)(1+i)Since both of these investments have the same risk,they must have the same future valueotherwise an arbitrage would exist.(F/S)(1+i)=(1+ius)McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-21Interest Rate Parity DefinedFormally,(F/S)(1+

30、i)=(1+ius)or if you prefer,SFii$11IRP is sometimes approximated as S(F-S)-i(i$McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-22IRP and Covered Interest ArbitrageIf IRP failed to hold,an arbitrage would exist.Its easiest to see this in the form of an example.C

31、onsider the following set of foreign and domestic interest rates and spot and forward exchange rates.Spot exchange rateS(0)=$1.25/360-day forward rateF(360)=$1.20/U.S.discount ratei$=7.10%British discount rate i=11.56%McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserv

32、ed.32-23IRP and Covered Interest ArbitrageA trader with$1,000 to invest could invest in the U.S.,in one year his investment will be worth$1,071=$1,000(1+i$)=$1,000(1.071)Alternatively,this trader could exchange$1,000 for 800 at the prevailing spot rate,(note that 800=$1,000$1.25/)invest 800 at i=11.

33、56%for one year to achieve 892.48.Translate 892.48 back into dollars at F(360)=$1.20/,the 892.48 will be exactly$1,071.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-24According to IRP only one 360-day forward rate,F(360),can exist.It must be the case that F(

34、360)=$1.20/Why?If F(360)$1.20/,an astute trader could make money with one of the following strategies:IRP&Exchange Rate DeterminationMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-25Arbitrage Strategy IIf F(360)$1.20/i.Borrow$1,000 at t=0 at i$=7.1%.ii.Exchan

35、ge$1,000 for 800 at the prevailing spot rate,(note that 800=$1,000$1.25/)invest 800 at 11.56%(i)for one year to achieve 892.48iii.Translate 892.48 back into dollars,if F(360)$1.20/,892.48 will be more than enough to repay your dollar obligation of$1,071.McGraw-Hill/IrwinCopyright 2002 by The McGraw-

36、Hill Companies,Inc.All rights reserved.32-26Arbitrage Strategy IIIf F(360)$1.20/i.Borrow 800 at t=0 at i=11.56%.ii.Exchange 800 for$1,000 at the prevailing spot rate,invest$1,000 at 7.1%for one year to achieve$1,071.iii.Translate$1,071 back into pounds,if F(360)$1.20/,$1,071 will be more than enough

37、 to repay your obligation of 892.48.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-27You are a U.S.importer of British woolens and have just ordered next years inventory.Payment of 100M is due in one year.IRP and Hedging Currency RiskIRP implies that there ar

38、e two ways that you fix the cash outflowa)Put yourself in a position that delivers 100M in one yeara long forward contract on the pound.You will pay(100M)(1.2/)=$120Mb)Form a forward market hedge as shown below.Spot exchange rateS(0)=$1.25/360-day forward rateF(360)=$1.20/U.S.discount ratei$=7.10%Br

39、itish discount rate i=11.56%McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-28IRP and a Forward Market Hedge To form a forward market hedge:Borrow$112.05 million in the U.S.(in one year you will owe$120 million).Translate$112.05 million into pounds at the spot

40、 rate S(0)=$1.25/to receive 89.64 million.Invest 89.64 million in the UK at i=11.56%for one year.In one year your investment will have grown to 100 millionexactly enough to pay your supplier.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-29Forward Market Hedg

41、e Where do the numbers come from?We owe our supplier 100 million in one yearso we know that we need to have an investment with a future value of 100 million.Since i=11.56%we need to invest 89.64 million at the start of the year.How many dollars will it take to acquire 89.64 million at the start of t

42、he year if S(0)=$1.25/?1.1156 100 89.641.25$1.0089.64$112.05 McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-30Reasons for Deviations from IRP Transactions Costs The interest rate available to an arbitrageur for borrowing,ib,may exceed the rate he can lend at,

43、il.There may be bid-ask spreads to overcome,Fb/Sa F/S Thus(Fb/Sa)(1+il)(1+i b)0 Capital Controls Governments sometimes restrict import and export of money through taxes or outright bans.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-31Equilibrium Exchange Rat

44、e RelationshipsS(F-S)E(e)-i(i$-IRPPPPFEFRPPPIFEFPMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-32A recipe for international decision makers:1.Estimate future cash flows in foreign currency.2.Convert to U.S.dollars at the predicted exchange rate.3.Calculate A

45、PV using the U.S.cost of capital.32.5 International Capital BudgetingMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-33Consider this European investment opportunity:International Capital Budgeting:Example%15$iIs this a good investment from the perspective of t

46、he U.S.shareholders?P=3%P$=6%S(0)=$.55265 600 200500 300 0 1 year 2 years3 yearsMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-34International Capital Budgeting:Example 600 200500 300 0 1 year 2 years3 yearsCF0=(600)S(0)=(600)($.5526/)=$331.6$331.6McGraw-Hill

47、/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-35International Capital Budgeting:Example 600 200500 300 0 1 year 2 years3 yearsCF1=(200)ES(1)ES(1)can be found by appealing to the interest rate differential:ES(1)=(1.06/1.03)S(0)=(1.06/1.03)($.5526/)=$.5687/so CF1=(200)($

48、.5687/)=$113.7$331.6$113.70McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-36International Capital Budgeting:Example 600 200500 300 0 1 year 2 years3 yearsSimilarly,CF2=(1.06)2/(1.03)2 S(0)(500)=$292.6CF3=(1.06)3/(1.03)3 S(0)(300)=$180.7$331.6$113.70$292.60$18

49、0.7030.107$)15.1(70.180$)15.1(60.292$)15.1(70.113$60.336$32APVMcGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-37Risk Adjustment in the Capital Budgeting Process Clearly risk and return are correlated.Political risk may exist along side of business risk,necessi

50、tating an adjustment in the discount rate.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-3832.6 International Financial DecisionsAn international firm can finance foreign projects in three basic ways:1.It can raise cash in the home country and export it to fi

51、nance the foreign project.2.It can raise cash by borrowing in the foreign country where the project is located.3.It can borrow in a third country where the cost of debt is lowest.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-3932.7 Reporting Foreign Operatio

52、nsWhen a U.S.multinational experiences favorable exchange rate movements,should this be reflected in the measurement of income?This is a controversial area.Two issues seem to arise:1.What is the appropriate exchange rate to use for translating each balance-sheet account?2.How should the unrealized a

53、ccounting gains and losses from foreign-currency translation be handled?Currency is currently translated under complicated rules set out in FASB 52.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-40The Mechanics of FASB Statement 52 Functional Currency The cur

54、rency that the business is conducted in.Reporting Currency The currency in which the MNC prepares its consolidated financial statements.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-41The Mechanics of FASB Statement 52 Two-Stage Process First,determine in wh

55、ich currency the foreign entity keeps its books.If the local currency in which the foreign entity keeps its books is not the functional currency,remeasurement into the functional currency is required.Second,when the foreign entitys functional currency is not the same as the parents currency,the fore

56、ign entitys books are translated using the current rate method.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-42Current Rate Method All balance sheet items(except for stockholders equity)are translated at the current exchange rate.A“plug”equity account named

57、cumulative translation adjustment(CTA)is used to make the balance sheet balanceBalance SheetLocal CurrencyCurrent RateCashDM2,100$1,050 InventoryDM1,500$750 Net fixed assetsDM3,000$1,500 Total AssetsDM6,600$3,300 Current liabilitiesDM1,200$600 Long-Term debtDM1,800$900 Common stockDM2,700$900 Retain

58、ed earningsDM900$360 CTA-$540 Total Liabilities and EquityDM6,600$3,300 McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-43The Mechanics of FASB Statement 52Current RateTranslationParents CurrencyForeign entitys books kept in?Functional Currency?Local currencyT

59、emporal RemeasurementParents currency NonparentCurrencyThird currencyParents Currency McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-4432.8 Summary and Conclusions This chapter describes some fundamental theories of international finance:Purchasing Power Pari

60、ty Expectations theory of exchange rates The interest-rate parity theorem This chapter also describes some of the problems of international capital budgeting.We briefly describe international financial markets.McGraw-Hill/IrwinCopyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.32-45MOMODA POWERPOINTLorem ipsum dolor sit amet,consectetur adipiscing elit.Fusce id urna blandit,eleifend nulla ac,fringilla purus.Nulla iaculis tempor felis ut cursus.感 谢 您 的 下 载 观 看感 谢 您 的 下 载 观 看专家告诉