CH 20 Abbr - C H A P T E R 20 20 Short­Term Financing Chapter Overview Chapter A Sources of Short­Term Financing B Internal Financing by MNCs C

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Unformatted text preview: C H A P T E R 20 20 Short­Term Financing Chapter Overview Chapter A. Sources of Short­Term Financing B. Internal Financing by MNCs C. Why MNCs Consider Foreign Financing D. Criteria Considered for Foreign Financing E. Financing with a Portfolio of Currencies Chapter 20 Objectives Chapter This chapter will: A. Explain why MNCs consider foreign financing B. Explain how MNCs determine whether to use foreign financing C. Illustrate the possible benefits of financing with a portfolio of currencies A. Sources of Short-Term Financing Financing 1. Euronotes 2. Euro­Commercial Paper 3. Eurobank Loans B. Internal Financing by MNCs B. 1. Repeated Financing with a Currency Portfolio a. Before an MNC’s parent or subsidiary in need of funds searches for outside funding, b. it should check other subsidiaries’ cash flow positions to determine whether any internal funds are available. C. Why MNCs Consider Foreign Financing Financing 1. Foreign Financing to Offset Foreign Currency Inflows a. How Avon Used Foreign Financing during the Asian Crisis 2. Foreign Financing to Reduce Costs Comparison of Interest Rates among Countries (as of February 2004) 20.1 20.1 D. Criteria Considered for Foreign Financing Financing 1. Interest Rate Parity 2. The Forward Rate as a Forecast D. Criteria Considered for Foreign Financing Financing 3. Exchange Rate Forecast a. Deriving a Value for ef That Equates Domestic and Foreign Rates b. Use of a Probability Distributions E. Financing with a Portfolio of Currencies Currencies 1. Repeated Financing with a Currency Portfolio ...
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This note was uploaded on 06/02/2011 for the course FINA 4315 taught by Professor Staff during the Spring '08 term at Texas A&M University, Corpus Christi.

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