FIN 340 Final Project Scenarios and Tables

This is for help on a discussion board question.

Explain what you enjoyed about this course, as well as what you did not find as beneficial. Do you feel more knowledgeable regarding multinational companies and overseas operations? If your company was expanding globally, what are two significant aspects/concepts regarding the capital structure of the organization and cost of capital for the expansion you would present as “need to know” information to other managers or investors?

Topics by week:

     Module One identifies the types of opportunities, forms of ownership, and strategies multinational companies use to expand globally or begin business within a foreign country. The module also examines the various strategies used to enter global trade, the risks companies endure, and how the size and objectives of the organization may make a difference to the outcome.

     Module Two will explain the relationship between the trade balance and rise and fall of interest rates as well as define the balance of payments and accounts used to create transactions. This module also examines the duties of a foreign exchange dealer and whether the utilization of a dealer is beneficial to a multinational organization.

     Module Three will provide knowledge and examples of tools multinational organizations use to finance international trade. These may be in the form of conventional financing, factoring of accounts, and countertrade. While investigating methods of financing, this module compares the components and use of effective financing rates versus annual percentage rates.

     Module Four will introduce the concepts of purchasing power parity and the law of one price, which is the concept that a basket of goods purchased in one country will cost the same in another country, even with a variance in exchange rates. This is a very important concept because fluctuations in cross exchange rates may allow individuals and businesses to create earnings based on the variance of exchange rates as their money is invested and traded around the globe. This module also examines the Fisher effect and how nominal interest rates and the required real rates of return are computed to allow for anticipated rates of inflation.

     Module Five will move further into purchasing power parity by defining and providing an example of the various approaches used. These approaches utilize the balance of payments, supply and demand, and the relative price for a portfolio of bonds. Currency market intervention will also be examined to understand why and how the government intervenes to control the rise and fall of inflation and unemployment rates by making decisions that ultimately increase or decrease the value of the currency.

     Module Six will provide insight into the foreign exchange market, how transactions are completed, and factors that may change the exchange rate from one currency to another. Direct quotes are those from the domestic country, while indirect quotes of exchange are those from a foreign country and currency. Cross, bid, and ask rates are all components of the foreign exchange market and may lead to fluctuations in the exchange rate. This module also examines the ins and outs of foreign exchange.

     An international business has many types of exposures management must be aware of. These are operating exposure, which measures the changing present value of the operation due to unexpected fluctuations in the exchange rates, translation exposure, which comes into play because financial statements prepared with the values of foreign currency must be restated in the domestic currency, and transaction exposure, which may be present when a contract is entered into at one exchange rate but later finalized after the exchanged rates have changed. In this module, all of these types of exposure will be presented with examples of how management may act to manage these exposures.

     Module Eight will encompass the formulas and calculations for a company that utilizes the marginal cost of capital (MCC), weighted average cost of capital (WACC), and the variances possible when various multinational capital structures are presented. Each company in this module will have a choice of investment projects to budget and analyze in order to make their final choice. The module also examines how financial tools are used to weigh the options of cost and profitability of investment projects to make the best investment decisions.

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