BusM 432
INTERNATIONAL FINANCIAL MANAGEMENT

FALL SEMESTER 2009
Course Prospectus

Objectives of the Course

The course focuses on the elements of international corporate finance that a financial manager will encounter in conducting business globally. It is not intended to develop students into international finance capital markets specialists or foreign exchange traders, rather it is designed to provide an international finance perspective for those who foresee working in international business. This course is designed to provide exposure to a range of international finance issues rather than to focus on only a few issues in depth in the hope of creating experts in those few areas.

The course will build on the foundation of the core finance and economics courses. Several of the basic concepts that were covered in those courses will be addressed again, however this time with an international perspective.

At the conclusion of the course, you should be able to:

        1.   Explain the differences between various exchange rate regimes and highlight the economic, political, and other factors that affect foreign exchange rates.

        2.   Describe foreign exchange exposure risk and methods of hedging against possible negative impacts on corporate performance.

        3.   Differentiate between U.S. and international capital markets’ characteristics and instruments.

        4.   Apply time value of money concepts to corporate capital budgeting decisions.

        5.   Incorporate international risk factors into capital budgeting decisions.

Required Materials

The textbook that we will use is David K. Eiteman, Arthur I. Stonehill, and Michael H. Moffett, Multinational Business Finance, 11^th Edition, (Pearson Addison Wesley Publishing Company), 2007. In addition, we will use a packet of cases available from the BYU Bookstore. You should respect the copyright laws and purchase rather than copy the packet. You will not be required to subscribe to any current periodicals. However, you should plan to follow current events in publications such as The Wall Street Journal, Business Week, The Economist and regional or national newspapers. This will provide you with information to discuss current events and their effect on international business.

You will need to undertake many financial calculations in the course. These can be done using a computer spreadsheet program such as Microsoft Excel. You might find it more convenient to use a financial calculator to do the calculations in class.

Topics Covered

The topics that we will discuss in the course can be grouped into four major categories.

        I.   International Monetary System. A major difference between domestic finance and international finance is the impact of foreign exchange. We will devote several sessions discussing the international financial system, how and why exchange rates move, methods for forecasting, etc.

        II.  Foreign Exchange Risk in the Corporation. In this segment of the course, we will discuss how foreign exchange risk affects a company and what measures are available to protect against this risk. We will also discuss internal and external reporting requirements and systems.

        III. Financing Foreign Operations. We will briefly discuss foreign capital markets. The focus will be primarily on debt markets and various debt instruments that are unique to the international capital markets.

        IV. Foreign Investment Decision. In this concluding section of the course, we will examine the process by which companies decide to make investments in foreign countries. We will discuss taxation, capital budgeting, country analysis, and different types of investment vehicles.

Instructional Methods

The course will include case discussions in addition to traditional lecture/discussion sessions. The purpose of the lecture/discussion sessions will be to explain basic concepts. The case sessions will provide you with the opportunity to apply the concepts to actual business situations. In discussing the cases, we will not attempt to discover the right solution or even reach a consensus. In fact, there may be several different recommendations that would be effective in specific situations. Our approach will be to solicit your ideas and thoughts about how to analyze the case situation and reach a conclusion. This approach takes advantage of the common pool of experience and diversity of viewpoints of the class members.

The use of the case method, however, places a premium on your analysis and the preparation of your recommended course of action in advance of each class session. You should have high expectations for yourself as well as your classmates regarding preparation and participation for our class discussions. To assist in the preparation of the cases, I recommend that you form study groups.

Written Assignments

We will have two required written assignments during the semester.

        1.   A written forecast of two exchange rates, the US$ vis-a-vis the Japanese Yen and the new European currency, the Euro. You must forecast the exchange rates for 30, 60, and 90 days in the future. The purpose of this exercise is for you to grapple with the issues and data required to forecast exchange rates. You are not expected to develop a sophisticated, computer-based, macro-economic model. Rather you should examine the relevant issues and develop a short, easily understood forecasting method. Therefore, the paper will be limited to no more than five (5) typed, doubled spaced pages. This paper is due on Friday, September 18, 2009 at 5:00 pm.

        2.   A written case analysis. The purpose of this assignment is to provide you with an opportunity to prepare a concise analysis and recommendation of a business issue. The case analysis will also be limited to five (5) pages. The case analysis must be completed and turned in by 5:00 pm the day before the case is to be discussed. Each student is responsible for selecting a case for the written analysis. Any of the cases may be selected subject to my approval. The deadline for selecting a case is Tuesday, September 22, 2009.

Grading

The determination of the grade for the course will be as follows:

The final examination will be a case analysis. The peer evaluation will be administered at the end of the semester. You will be asked to evaluate the quality of preparation and class participation for yourself and your classmates.

Office Hours

I do not have regularly scheduled office hours but am generally in my office and available to student consultation. If you have difficulty finding me in my office, please talk with me in class or email me to arrange an appointment.

Course Communication

I expect to email class members frequently with announcements, follow-up materials from class discussions, etc. and will use the email addresses that are available on Rout Y. Since you will be responsible for all messages sent through email, please ensure that your email address is correct.

Ethical Behavior

I expect that your conduct as students will be consistent with the Honor Code standards of honesty and integrity established by Brigham Young University and the Church. I consider unethical behavior to include the following: (1) any form of harassment, including denigrating comments based on race, color, religion, gender, national origin, ethnicity, disability, or age; (2) plagiarism in any form; (3) failure to identify direct quotations or the source of ideas obtained from other writers; (4) sharing information with other students about the content of, or answers to, examinations; (5) taking another person’s examination, or permitting another person to take your exam; (6) obtaining information, visually or otherwise, from another student during an examination; (7) the use of unauthorized sources of information during an examination; (8) gaining access by theft or other means to an exam before it is given to the class; (9) the unauthorized use of an instructor’s manual.

You are encouraged to work with others in study groups; however, any written work must be done individually. Any violations of these standards will be reported for University action.

Preventing Sexual Harassment

Title IX of the Education Amendments of 1972 prohibits sex discrimination against any participant in an educational program or activity that receives federal funds. The act is intended to eliminate sex discrimination in education. Title IX covers discrimination in programs, admissions, activities, and student-to-student sexual harassment. BYU’s policy against sexual harassment extends not only to employees of the university, but to students as well. If you encounter unlawful sexual harassment or gender based discrimination, please talk to me; contact the Equal Employment Office at 422-5895 or 367-5689 (24-hours); or contact the Honor Code Office at 422-2847.

Students with Disabilities

Brigham University is committed to providing a working and learning atmosphere, which reasonably accommodates qualified persons with disabilities. If you have any disability which may impair your ability to complete this course successfully, please contact the Services for Students with Disabilities Office (422-2767). Reasonable academic accommodations are reviewed for all students who have qualified, documented disabilities. Services are coordinated with the student and instructor by the SSD Office. If you need assistance or if you feel you have been unlawfully discriminated against on the basis of disability, you may seek resolution through established grievance policy and procedures. You should contact the Equal Employment Office at 422-5895, D-285 ASB.

Policy on the Use of Technology in the Classroom

Technology is an essential part of today’s learning environment. That is why the Marriott School requires every student to own a laptop. However, technology, when used inappropriately, can also hinder learning. Most Marriott School students have, at some point, sat next to students who use their laptops or PDAs in class to check e-mail, talk to friends, instant message, search the internet or play on-line games. Unfortunately, every person sitting around such students is distracted by this behavior and classroom learning decreases. As a result of these distractions, the Marriott School has implemented the following policy effective Fall Semester, 2006: Using laptops or PDAs in class to legitimately take notes or work on class projects is allowed, but all other use of laptops or PDAs in class is prohibited. Please respect your fellow students and professors and abide by this Marriott School policy.

Course Outline

The following is a general outline of the course. I reserve the right to make changes in this schedule to cover important topical events, for example a collapse of the global financial system or a significant fluctuation in currency values.

All of the assigned chapters are in Multinational Business Finance. The cases are in the packet. Study questions for each class session will be distributed in class and are also available on my website: http://bus.byuh.edu/wilsonb/.