ch19 - CHAPTER19 MultinationalFinancial Management

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    19-1 CHAPTER 19 Multinational Financial  Management Multinational vs. domestic financial  management Exchange rates and trading in foreign  exchange International money and capital markets
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    19-2 What is a multinational corporation? A corporation that  operates in two or more  countries. Decision making within  the corporation may be  centralized in the home  country, or may be  decentralized across the  countries the corporation  does business in.
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    19-3 Why do firms expand into  other countries? 1. To seek new markets. 2. To seek raw materials. 3. To seek new technology. 4. To seek production efficiency. 5. To avoid political and regulatory  hurdles.                       6. To diversify.
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    19-4 What factors distinguish multinational  financial management from domestic  financial management? 1. Different currency denominations. 2. Economic and legal ramifications. 3. Language differences. 4. Cultural differences. 5. Role of governments. 6. Political risk.
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    19-5 Consider the following  exchange rates US $ to buy 1 unit Japanese yen 0.009 Australian dollar 0.650 Are these currency prices direct or indirect  quotations? Since they are prices of foreign  currencies expressed in dollars, they are  direct quotations.
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    19-6 What is an indirect quotation? The number of units of a foreign  currency needed to purchase one U.S.  dollar, or the reciprocal of a direct  quotation. Are you more likely to observe direct or  indirect quotations? Most exchange rates are stated in terms of  an indirect quotation. Except the British pound, which is usually in  terms of a direct quotation.
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    19-7 Calculate the indirect quotations  for yen and Australian dollar # of units of foreign    currency per US $ Japanese yen 111.11 Australian dollar 1.5385 Simply find the inverse of the direct  quotations.
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    19-8 What is a cross rate? The exchange rate between any two  currencies.  Cross rates are actually calculated  on the basis of various currencies relative to the  U.S. dollar. Cross rate between Australian dollar and the 
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ch19 - CHAPTER19 MultinationalFinancial Management

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