How does the multinational’s ability to diversify its cash flows alter its ability to use greater amounts of debt?
> As a firm evolves from purely domestic into a true multinational enterprise, it must consider a) its competitive advantages, b) its production location, c) the type of control it wants to have over any foreign operations, and d) how much monetary cap
> List the steps involved in the export of lumber from Portland, Oregon, to Yokohama, Japan, using a confirmed letter of credit, payment to be made in 120 days.
> List the steps involved in the export of computer hard disk drives from Penang, Malaysia, to San Jose, California, using an unconfirmed letter of credit authorizing payment on sight.
> Why would an exporter insist on a confirmed letter of credit?
> Identify each party to a letter of credit (L/C) and indicate its responsibility.
> What is the major difference between currency risk and risk of non-completion? How are these risks handled in a typical international trade transaction?
> What is different about international financial management?
> Explain the difference between a letter of credit (L/C) and a draft. How are they linked?
> What reasons can you give for the observation that intrafirm trade is now greater than trade between non-affiliated exporters and importers?
> Which assets play the most critical role in linking the major institutions that make up the global financial marketplace?
> The term globalization has become widely used in recent years. How would you define it?
> What does it mean for a country—or its government—to compete for business on the basis of taxation?
> How is cross-border digital commerce challenging the traditional ways in which multinational companies are taxed?
> What is a corporate inversion, and why do many U.S. corporations want to pursue it although it is highly criticized by public and private parties alike?
> What is a tax haven? Is it the same thing as an international offshore financial center? What is the purpose of a multinational creating and operating a financial subsidiary in a tax haven?
> What role does transfer pricing have within multinational companies when measuring management performance? How can transfer pricing practices within a firm conflict with performance measurement?
> Explain how the check-the-box regulatory change altered the effectiveness of Subpart F income regulations.
> Key to understanding most theories is what they say and what they don’t. Name four or five key limitations to the theory of comparative advantage.
> For what reason might an exporter use standard international trade documentation (letter of credit, draft, order bill of lading) on an intrafirm export to its parent or sister subsidiary?
> Define cross-crediting and explain why it may or may not be consistent with a worldwide tax regime.
> What is Section 482 of the U.S. Internal Revenue Code and what guidelines does it recommend when setting transfer prices?
> What is the income tax effect, and how may a multinational firm alter transfer prices as a result of the income tax effect?
> What is fund positioning?
> What is a transfer price and can a government regulate it? What difficulties and motives does a parent multinational firm face in setting transfer prices?
> What is a controlled foreign corporation and what is its significance in global tax management?
> What is earnings stripping, and what are some examples of how multinational firms pursue it?
> What is a foreign tax credit? Why do countries give credit for taxes paid on foreign source income?
> Distinguish between the three levels of commitment for ADRs traded in the United States.
> Define and explain the theory of comparative advantage.
> Why should a foreign project be evaluated both from a project and parent viewpoint?
> Various governments have established agencies to insure against nonpayment for exports and/or to provide export credit. This shifts credit risk away from private banks and to the citizen taxpayers of the country whose government created and backs the age
> Why might different documentation be used for an export to a nonaffiliated foreign buyer who is a new customer, as compared with an export to a nonaffiliated foreign buyer to whom the exporter has been selling for many years?
> What is usually included within a tax treaty?
> What is a withholding tax and why do governments impose them?
> What is a value-added tax, and how does it differ from an income tax?
> What is meant by tax deferral in the U.S. system of taxation? What is the deferral privilege?
> What is the difference between a direct tax and an indirect tax?
> What is the difference between the worldwide and territorial approaches to taxation?
> What is tax neutrality? What is the difference between domestic neutrality and foreign neutrality?
> What is meant by the term ‘tax morality’? If for example, your company has a subsidiary in Russia where some believe tax evasion is a fine art, should you comply with Russian tax laws or violate the laws as do your local competitors?
> Why have eurocurrencies and LIBOR remained the centerpiece of the global financial marketplace for so long?
> What do the terms active and passive mean in the context of U.S. taxation of foreign source income?
> What is the primary objective of multinational tax planning?
> What is the difference between a GDR, ADR, and GRS? How are these differences significant?
> What is a depositary receipt? What are equity shares listed and issued in foreign equity markets in this form?
> What is a directed public issue? What is the purpose of this kind of an international equity issuance?
> What are the alternative structures available for raising equity capital on the global market?
> What are the three key elements related to raising equity capital in the global marketplace?
> How does borrowing in a foreign currency change the risk associated with debt?
> How do the motivations of individuals, both inside and outside the organization or business, define the limits of financial globalization?
> What technological change is even changing the symbols we use in the representation of different country currencies?
> What are the primary alternatives for the external financing of a foreign subsidiary?
> What is the difference between "internal" financing and "external" financing for a subsidiary?
> Should foreign subsidiaries of multinational firms conform to the capital structure norms of the host country or to the norms of their parent's country?
> What are the primary methods of funding foreign subsidiaries, and how do host government concerns affect those choices?
> What is the difference between a eurobond and a foreign bond and why do two types of international bonds exist?
> If the cost of debt is less than the cost of equity, why doesn’t the firm’s cost of capital continue to decrease with the use of more and more debt?
> What are the primary alternative instruments available for raising debt on the international marketplace?
> What is the advantage of securitized debt instruments sold on a market versus bank borrowing for multinational corporations?
> What is private equity and how do private equity funds differ from traditional venture capital firms?
> What is a private placement? What are the comparative pros and cons of private placement versus a pubic issue?
> Explain the strategies used by an MNE to counter blocked funds.
> What are the main barriers to cross-listing abroad?
> What are the main reasons causing firms to cross-list abroad?
> Give five reasons why a firm might cross-list and sell its shares on a very liquid stock exchange.
> What is the significance of IPOs versus FOs?
> ADRs and GDRs can be sponsored or unsponsored. What does it mean and will it matter to the investors purchasing the shares?
> Why does the strategic path to sourcing equity start with debt?
> Portfolio asset allocation can be accomplished along many dimensions depending on the investment objective of the portfolio manager. Identify the various dimensions.
> What are the fundamental distinctions which the international CAPM tries to capture which traditional domestic CAPM does not?
> What is the main advantage that international portfolio managers have compared to portfolio managers limited to domestic-only asset allocation?
> Both domestic and international portfolio managers are asset allocators. What is their portfolio management objective?
> What are some of the characteristics of a well-designed dispute resolution process?
> What is an equity risk premium? For an equity risk premium to be truly useful, what need it do?
> What are the classifications used in defining risk in the estimation of a firm’s cost of equity?
> What are the benefits of achieving a lower cost and greater availability of capital?
> How does capital mobility typically differ between industrialized countries and emerging market countries?
> Which do most countries control, capital inflows or capital outflows? Why?
> What factors seem to play a role in a government's choice to restrict capital mobility?
> Has capital mobility improved steadily over the past 50 years?
> Ultimately, what actions did Novo take to escape its segmented market?
> Global integration has given many firms access to new and cheaper sources of funds beyond those available in their home markets. What are the dimensions of a strategy to capture this lower cost and greater availability of capital?
> What were the impacts on Novo as a result of operating in a segmented market? What were the primary causes of the market segmentation?
> What are the primary pros and cons of using a gradual investing strategy to mitigate political risk?
> Why might emerging market multinationals list their shares abroad?
> What is the paradox?
> Do multinational firms have higher lower betas than their domestic counterparts?
> Do multinational firms use relatively more or less debt than their domestic counterparts? Why?
> Do multinational firms have a higher or lower cost of capital than their domestic counterparts? Is this surprising?
> Firms located in illiquid and segmented emerging markets would benefit from nationalizing their own cost of capital. What do they need to do, and what conditions must exist for their efforts to succeed?
> What is the effect of market liquidity and segmentation on a firm's cost of capital?
> What is market segmentation, and what are the six main causes of market segmentation?
> What is meant by the term market liquidity? What are the main disadvantages for a firm to be located in an illiquid market?
> What are the most common challenges a firm resident in a segmented market faces in regards to its access to capital?
> Answer the following questions about OPIC: a. What is OPIC? b. What types of political risks can OPIC insure against?
> The key to managing operating exposure at the strategic level is for management to recognize a disequilibrium in parity conditions when it occurs and to be pre-positioned to react most appropriately. How can this task best be accomplished?
> The objective of both operating and transaction exposure management is to anticipate and influence the effect of unexpected changes in exchange rates on a firm's future cash flows. What strategic alternative policies exist to enable management to manage
> Explain how the concept of macroeconomic uncertainty expands the scope of analyzing operating exposure.
> According to financial theory, which is more important to the value of the firm, financing or operating cash flows?
> What are examples of static exposures versus dynamic exposures?
