IFIMAN-B+Discussion+Class+Slides+Session+3

IFIMAN-B+Discussion+Class+Slides+Session+3 - IFIMAN-B...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
IFIMAN-B Session 3 Lecture Outline Financing Decisions of MNCs Short-Term Financing Decisions Consider why MNCs consider foreign financing Long-Term Financing Decisions Assess the feasibility of long-term financing in foreign currencies
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Internal Financing by MNCs Before an MNC’s parent or subsidiary searches for outside funding, it should determine if any internal funds are available. Parents of MNCs may also raise funds by increasing their markups on the supplies that they send to their subsidiaries.
Background image of page 2
Why MNCs Consider Foreign Financing An MNC may finance in a foreign currency to offset a net receivables position in that foreign currency, e.g. by use of a money market hedge. An MNC may also consider borrowing foreign currencies when the interest rates on such currencies are attractive, so as to reduce the cost of financing.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Criteria Considered for Foreign Financing There are various criteria an MNC must consider in its financing decision, including interest rate parity, the forward rate as a forecast, and exchange rate forecasts.
Background image of page 4
If IRP holds, foreign financing with a simultaneous hedge of that position in the forward market will result in financing costs similar to those for domestic financing. No real benefit in foreign financing if IRP
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 18

IFIMAN-B+Discussion+Class+Slides+Session+3 - IFIMAN-B...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online