FREEMAN SCHOOL OF BUSINESS FINE 4150 02 International Finance Spring 2012 Instructor: Eduardo Pablo Office: GWII2144 Office Hours: Wednesday 10:30-12:30 Class Meeting Day & Time: M-W 12:30-13:45 Office Phone: 504-8655837 E-mail: epablo@tulane.edu Blackboard Site: mytulane.blackboard.com Class Location: GWI-101 Course Description: International Finance is the sub-area of finance that studies the international investment decisions concerning real and financial assets. This course is intended for students who wish to learn the concepts and theories of modern multinational financial management. International Finance gives participants a solid theoretical and practical background that serves to better understand (1) the importance of risk management in a Multinational Corporation (MNC); (2) the particularities of corporate finance, corporate governance and portfolio management in a global context. Course Prerequisites: FINE 4100, 4120 Course Goals: This course is designed to give students the knowledge and skills required by a modern financial executive in order to: Understand the nature of financial decision making in an international context. Use models derived from financial theory to support financial analysis and guide decisions that maximize the Multinational Corporation s value. Manage properly the risks associated to operate in an international environment, mainly currency risk and country risk. Evaluate an international project in the corporation investment opportunity set in order to identify and take on only investment opportunities that will increase the value of the corporation. Know the basics of international portfolio management and the association between risk and return of individual assets and investment portfolios. Student Learning Objectives: As the result of this course, students should be able to: Make adequate financial decisions which maximize the MNC s firm value. Contribute to their country's sustainable development, by making sound financial decisions within an international for-profit organization that creates value and optimizes the utilization of available resources. Perform their professional activity in an honest and responsible manner. 1
Understand the impact that currency risk may have on a company's viability and value. Show flexibility in adapting to the market conditions. Understand how for a MNC, the business risk and the financial risk associated with a(n) firm (investment) translates into the opportunity cost of capital. Course Material: Butler C. Kirt, Multinational Finance, Fourth Edition (2008), Wiley Finance Course Slide Set Any additional material will be provided in before the class or given in class. Grading: The assessment policy for this course is specified in the following paragraphs. Please read them carefully, as in the interest of fairness to all students, no exceptions will be made. Performance will be measured by three individual examinations, three group assignment, and relevant participation in class. The final grade is computed based on the following weights: Group assignments Individual Examinations Active and Relevant Participation Total 40 points 50 points 10 points 100 points Individual Examinations: The exams can be a combination of multiple choice questions, short answers, and problems. They will test the class lectures and material covered in class. Group Assignments: Described below. Class Attendance: Attendance to class is required and is evaluated as part of the regular participation of the student. Students cannot miss any of the dates where an exam is scheduled. Statement about Academic Integrity: This class will be conducted in full accordance with Tulane s policies about academic integrity including, but not limited to, the Unified Code of Graduate Student Academic Conduct (http://tulane.edu/provost/upload/unified_code_of_gs_academic_conduct_11-14-07.pdf ) and the Tulane University Code of Student Conduct (http://studentconduct.tulane.edu). Norms and Expectations: This class will be conducted in full accordance with published Norms and Expectations for Students in Freeman Classes. Please review the Norms and Expectations in your program handbook. Learning Disabilities: Under the Americans with Disability Act and Section 504 of the Rehabilitation Act, if you have a disability, you may have the right to an accommodation; however, the right is contingent upon your taking certain steps. You should review the steps that you need to take, as well as Tulane s policy concerning accommodations at http://erc.tulane.edu/disability/index.html. Any student with a disability, in need of course or examination accommodation, should request an accommodation through the University s Goldman Office of Disability Services (ODS) located on the first floor of the Mechanical Engineering Building. At the beginning of the semester, please provide me with a copy of your approved ODS accommodation form. I am committed to working with ODS to ensure 2
that I provide you with all approved accommodations. If you do not deliver the approved accommodation form to me, I will not know that ODS approved your accommodation and I will have no basis to provide those accommodations. Specific Course Policies: The course consists of lectures designed to develop an understanding of the major elements of international finance. A tentative list of topics and the sequence in which they will be covered are shown below. The emphasis is placed on the logic underlying each concept, how each concept is used, and how they are interrelated. The course will cover some of the chapters in the prescribed textbook, some in their entirety and others only partially. Additional material in the form of magazine and newspaper articles of current events, academic papers, or mini-cases could also be distributed in class or through the course platform. All this material is aimed at helping you to integrate the concepts with real world applications. The A.B. Freeman School of Business has adopted the Participant-Centered Learning methodology. Therefore, I expect an active participation from students in class discussions. Remember that through this learning methodology you acquire knowledge from the professor (that becomes a facilitator), the readings and exercises assigned, and from other participants (class discussions, group assignments). There will be in-class group assignments that participants should submit to the professor and are fully evaluated. The ideal number of members per group for this class is 4 or 5. These exercises are intended to get participants familiar with the concepts and methodology covered in class. These problems are due few days before each individual exam. See Class Schedule in this document for tentative deadlines. Group evaluation will be complemented by three individual examinations: Two mid-terms and the final exam. The best way to get ready for these examinations is solving (and understanding) group assignments and attending classes in order to consult your doubts with the professor as soon as possible. An effective and productive communication between participants and the professor is a must. The following bullets show the rules of the game regarding communication in order to maximize the productivity of our time: o The communication channel for any concern about individual questions and group assignments (i.e. doubts about assumptions, or the best way to solve a problem, asking for hints, etc.), is the virtual platform BlackBoard. I will open discussion boards to canalize your questions. The idea is to publicly expose participant's questions and the professor's answers since most of the time the participants share the same questions. o With the exception of the recommended textbook, the rest of the material will be published in the course platform or distributed in class on a timely manner. o For any other reason, my email (epablo@tulane.edu) is the appropriate communication channel. Informing about a student missing a session, or addressing your individual performance, are just some examples. Please, begin the subject line with the INFIN: For example, the subject line for an email about missing a class will be INFIN: Missing Monday's class. 3
Class Schedule: Overview and Exchange Rate Determination WEEK 1 (Butler 1, 2, 3) W 01/18 An Introduction to Multinational Finance FX, Eurocurrency Markets WEEK 2 (Butler 4) M-W 01/23-25 The International Parity Conditions WEEK 3 (Butler 4) M 01/30 The International Parity Conditions The MNC's Financial Decisions WEEK 3 (Butler 5-7, 8) W 02/01 The Rationale for Hedging Currency Risks and Other Type of Risks WEEK 4 (Butler 5-7, 8) M 02/06 WEEK 4 W 02/08 Exam 1 The MNC's Investment Decisions and the Cost of Capital WEEK 5 (Butler 5-7 10) M-W 02/13-15 Currency Risk Management (Transaction Risk) WEEK 6 (Butler 11) W 02/22 Currency Risk Management (Operating Risk) 4
WEEK 7 (Butler 11, 14) M-W 02/27-29 Currency Risk Management (Operating Risk) Capital Budgeting without Frontiers WEEK 8 (Butler 14,13) M-W 03/05-07 Capital Budgeting without Frontiers Country Risk Management WEEK 9 (Butler 13, 17) M-W 03/19-21 Country Risk Management Real Options and Cross-Border Investment WEEK 10 M 03/26 Exam 2 International Markets and Portfolio Investment WEEK 10 (Butler 17) W 03/28 Real Options and Cross-Border Investment WEEK 11 (Butler 15) M-W 04/02-04 Capital Structure and the Cost of Capital for the Multinational Firm WEEK 12 (Butler 18) W 04/11 Corporate Governance and the International Market for Corporate Control WEEK 13 (Butler 19-20) M-W 04/16-18 International Portfolio Diversification WEEK 14 (Butler 21) M-W 04/23-25 International Asset Pricing WEEK 15 M 04/30 Review Material Finance Examination NOTE: The syllabus as well as details of the course is flexible and there may be changes. If there are changes due to unexpected events, they will be announced taking into account the interest of everybody in order to minimize the inconveniences created. 5