International Corporate Finance

This course provides an overview of the global financial environment, presents the BOP accounts, imparts a serious discussion of foreign exchange-rate determination and markets; and heavily emphasizes both foreign exchange-rate risk management and corporate strategy for foreign direct investment. Additionally, the course presents an extensive (case study) discussion of the international capital budgeting decision process as it pertains to the special risks associated with international investing such as political and sovereign risk, inflation risk and much, much more. Cash versus equity purchases are analyzed. The perspective of international mergers and acquisitions is also explored.

20-Oct-2008 -- 24-Oct-2008New YorkUSD$4675
NY Institute of Finance - Downtown9:00am - 4:30pm Instructional Method:
Group-Live
Instructor(s): [ William Henry; ] Mon Tue Wed Thu Fri Level: Advanced
CPE Credits: 36.0

Executives whose work-related activities fall within the domain of the subject matter of this course—corporate finance, international and monetary economics.
No advance preparation required.
Students will be able to:
  • Demonstrate a practical understanding of the core concepts of financial models for securities
  • Develop hands-on, spreadsheet modeling skills
  • Build specific models for fixed income, equities and options
  • Demonstrate application of these skills to solve a variety of investment related problems
International Corporate Finance is a course having an advanced curriculum and is equivalent in degree of difficulty to a graduate-level course taught at a major university or to that of an extensive and directed preparation for the CFA Level II or CFA Level III examination. The course assumes that students have a basic knowledge of accounting, economics and finance and a sufficient quantitative background in the calculus (derivation and integration) and statistics. A real plus would be a knowledge of monetary (to include international) economics. Basic knowledge in corporate finance is required.
New York Institute of Finance is pleased to offer two exceptionally challenging and market relevant courses in the field of Corporate Finance – Advanced Corporate Finance and International Corporate Finance. Offered as the Advanced Corporate Finance Academy Suite, these advanced level courses are excellent complements to one another. Balancing theory and conceptual frameworks with practical applications, these courses will enable you to return to the workplace with hands-on skills to succeed in the financial and corporate sector. These are graduate level courses and do have pre-requisites. The cost of the Suite is $7,500. This is a savings of $1,200 if you register for both classes at the same time.
Course Materials:
Eiteman, David K.: Stonehill, Arthur I.; and Moffett, Michael H. Multinational Business Finance, 11th Edition. Boston, Massachusetts: Pearson Education, Inc. www.pearsoned.com, 2007. Required.
Day 1 - The Global Economy, Monied Exchange & Finance

Why study international finance

  • Multinational Enterprise (MNE) - Financial Planning & Control and Investment
  • Financial planning and control
  • The efficient allocation of funs among various assets (investment decisions)
  • The acquisition of funds on favorable terms (financing decisions)
  • Portfolio diversification
  • Principle of comparative advantage, or cost
  • The Social Division of Labor and the principle of comparative advantage
  • Economies of scale
  • Agency theory and corporate governance
  • (read chapter 1 of textbook)

Reasons for world trade and foreign investments

  • Principle of comparative advantage, or cost
  • Theory of factor endowments
  • The theory of the product life cycle
  • Portfolio diversification
  • New markets, raw materials, production efficiency, new knowledge
  • Economies of scale again
  • Free trade vs. protectionism
  • International & regional economic integration: types of economic cooperation
  • (commence reading chapter 2 of textbook)

The international monetary system

  • The origin of money theory
  • Concept of a money substitute
  • Various market instruments as money - diagram
  • The influence of government on the monetary system
  • The case of the Euro
  • (read handout on the Origin of Money Theory and finish chapter 2 of textbook)

The balance-of-payments (BOP) theory of foreign exchange

  • The BOP theory is one of two explanations of changing exchange rates
  • Two parts to the problem of the exchange-ratio between two monies
  • The BOP and its use as a theory of exchange-rate variation
  • (read chapter 3 and commence reading chapter 5 of textbook)

Foreign-exchange risk management: Currency futures and options

  • The foreign exchange markets
  • The currency futures market
  • The currency options market
  • Futures options
  • (read chapters 6 and 7 of textbook)

Financial swaps

  • Evolution of the swap market
  • Plain vanilla swaps
  • Why participate in swap transactions
  • (commence reading chapter 14 of the textbook)

Day 2 - The Global Economy, Monied Exchange & Finance (continued)

The international monetary system (continued)

  • Graphing the demand for money & supply of money
  • The demand and supply graph for loanable funds
  • Graphing exercises - four cases
  • Definition of money and important secondary function
  • The level of cash holdings and the velocity of circulation
  • Central banking: the bank of issue function & the credit expansion process
  • The quantity theory of money: modern interpretation, the purchasing power (or exchange value) of money and statistics versus dynamics
  • The primary business of banking and other types of banking activity
  • The function of bank reserves
  • Three meanings of the word liquidity & the distinction of liquidity vs. solvency
  • (read handouts No. 2 and No. 3 and chapter 2 again of the textbook)

The nominal rate of interest

  • Five components of the nominal rate of interest
  • Pure (originary) rate of interest
  • The debtors' risk premium
  • The inflationary (deflationary) price premium
  • The liquidity premium
  • Actions of the Central Bank
  • (see 3rd handout again)

The purchasing power parity (PPP) theory of foreign exchange

  • The PPP is one of two explanations of changing exchange rates
  • Inter-local price relations: import and export points
  • Law of one price (LOP) and purchasing power par
  • Alleged differences in the purchasing power of money
  • Local differences in the cost of living
  • Commodity arbitrage
  • (finish reading chapter 5 of textbook)

More FX Risk Management: transaction, operating & translation exposures

  • Three types of exchange-rate risk: transaction, economic (operating) and translation exposures
  • Transation exposure management: the forward market hedge
  • The money market hedge, the options market hedge and swap agreements as a hedge
  • Current exposure management and the use of hedging techniques by a MNE
  • (read chapters 8 and 9 of textbook)

More foreign exchange risk management (continued) translation exposure

  • Four translation methods, FASB statements 8 and 52
  • Hedging translation exposure: the balance-sheet hedge
  • Indirect funds-adjustment methods
  • (read chapter 10 of textbook)

Day 3 - Souces of global finance: the funding of international trade and foreign investment

Spot, forward and futures markets in foreign exchange

  • International parity conditions
  • The theory of interest-rate parity
  • Two and three-point arbitrage and covered-interest arbitrage
  • (read chapters 4 and 5 of textbook)

How to read the Financial Times

  • Eurocurrency markets
  • The eurocurrency interbank market
  • The Asian currency market
  • The international bond market
  • The international equity market
  • (read chapter 20 of textbook)

Day 4 - International/Global investment

Working capital management on a global scale

  • Working capital management
  • Cash management
  • Accounts receivable management
  • Inventory management
  • (read chapter 22 of textbook)

Global and international portfolio management

  • Diversification and downside protction
  • (read chapter 15 of textbook)

Corporate strategy and foreign direct investment (FDI)

  • Foreign direct investment (FDI)
  • Foreign direct investment in emerging market countries
  • International merger and acquisitions
  • The principle of comparative advantage or cost
  • Starting an oil and gas company in the United States of America
  • Starting an oil and gas company in Canada
  • (see handout No. 4 and read chapter 16 of textbook)

Foreign-exchange risk management again: currency swaps

  • Swapping to fixed rates
  • Swapping floating currency into fixed-rate currency
  • Counterparty risk
  • Three-way back-to-back cross-currency swap
  • (finish reading chapter 14 of textbook)

Day 5 - International/Global Investment (continued)

Capital budgeting decisions and the cost of capital for foreign projects

  • The foreign investment decision-making process
  • Portfolio theory
  • Capital budgeting theory and practice
  • The optimum capital structure
  • The marginal cost of capital and investment decisions
  • Performance evaluation
  • Case study: Carlton's Chinese Market Entry - An application of real option analysis
  • (read chapter 18 of textbook)

Cross-border mergers and acquisitions, and valuation

  • Preliminaries: WACC, cross-border acquisition advantages and problems, valuation, etc.
  • Case study: Acquisition of Amoco by British Petroleum (BP)
  • (read chapter 19 of textbook)

Multinational tax management

  • Tax principles
  • Transfer pricing
  • (read chapter 21 of textbook)

Clients who register for this course will receive a complimentary 6 month subscription to the Financial Times and FT.com. The Financial Times is the world's most respected financial newspaper providing a broad assessment on finance, business and the industrial sector. Subscriptions will start within 6-8 weeks of the application process, and are limited to one per client. For questions about your subscriptions call 800-628-8088 or email uscirculation@ft.com. US and Canada enrollees only.

Lunch included for all students taking day classes.