UNIVERSITY OF SAN FRANCISCO

School of Management
SYLLABUS
BUS 430: International Financial Management
Fall 2018

Mr. Mefford
Office: Malloy 302
Class meetings: Tuesday 2:40 – 4:20 pm in LL6, Thursday 2:40 – 4:20 pm online (Zoom)
Office Hours: Tuesday 11 am – noon in MH 302, Thursday 11 am – noon by Zoom at
https://usfca.zoom.us/j/98307459892 , and by appointment
Phone : (415) 422-6 :408
E-mail: mefford@usfca.edu

Course Format

This course will be in a hybrid format with the Tuesday class in-person on campus and the Thursday
class online by Zoom. Course materials (except the text), including lecture notes, articles, cases,
problem sets, and projects, can be found on Canvas. The lecture notes are narrated and should be read
prior to the appropriate discussion section as indicated on the syllabus. We will use the discussion
sections to discuss key issues and concepts, current events, the articles in the course reader, as well as
problem sets and cases. All assignments will be submitted on Canvas.

Course Description

As firms increasing globalize their operations, their financial activities must take account of the
opportunities and risks inherent in international operations. This course introduces the concepts and
methods necessary to make financial decisions in a global context. The international financial
environment consisting of economic linkages, multinational institutions, capital markets, and the
international monetary system is explored. Exchange rates affect most global financial decisions, and
we will examine how currency values are determined and forecasting methods used to predict changes
in these values. Currency hedging decisions are considered including the use of derivatives for this
purpose. Financing of multinational firms offers many possibilities unavailable to the domestic firm,
and we will examine the use of the Euromarkets and currency and interest rate swaps along with other
financial instruments. Investment decisions involving both direct and portfolio investments will be
discussed, and analytical approaches including discounted cash flow and growth options applied. The
special issues involved in the management of working capital in the global firm including transfer
pricing, global fund transfers, and risk management are discussed and methods to effectively manage
them presented. Also trade financing and international accounting and tax issues will be considered.

Learning Goals

The main objectives of this course are to teach the student about the international economic and
financial markets as they affect the business firm operating globally and how to make financial
management decisions in this environment. Conceptual knowledge based on economic and
finance theory will be developed to provide a framework for understanding current events and to
guide decision-
making, as well as techniques and practices used by firms to effectively manage their international
financial activities. It is expected that the student will complete the course with the requisite knowledge
and skills to go into a finance position with a firm and have a fundamental understanding of the
activities and decisions to be made in the global arena. In addition, it is hoped that the prospective
manager will approach these responsibilities in an ethical and humanistic way. Throughout the course, I
hope that students will share their experiences and perspectives so that we may all learn from each other
as a learning community.

Prerequisites for the Course

BUS 305, Financial Management, is the prerequisite for this course.

Materials

1. Multinational Business Finance, D.K. Eiteman, A.I. Stonehill, & M.H. Moffett, 15th Ed., 2017,
Pearson.

2. “Course Reader” containing various articles, found on Canvas

Cases

There are short cases covering various topics in the course. They are found in the text and/or on Canvas.
For each case you should read the case and write answers to the questions at the end of the case. The
case write-ups are to be done in groups, are graded, and are due as indicated on the course schedule. All
cases are to be submitted on Canvas.

Problem Sets

For several of the quantitative topics in the course (e.g., foreign exchange risk management, FX and
interest rate derivatives, cost of capital, capital budgeting, working capital management, and tax
management) problem sets will be assigned. They are to be done individually. The due dates are
indicated on the course schedule. They will be graded and similar questions will appear on the exams.
All problem sets are to be submitted on Canvas.

Projects

There will be two projects to be done in groups. The first is an assessment of a current events topic that
will be presented to the class by the group. I will provide a list of potential projects or you may develop
your own (to be approved by the instructor). More detailed instructions will be provided later. The
second project involves currency risk management in a global firm where the group will analyze and
propose appropriate hedging mechanisms. This project will be distributed and explained at about the
midway point of the course. The projects will be submitted on Canvas.

Exams

There will be two exams, a midterm exam and a final exam. Both exams will be take-home exams that
will be submitted on Canvas. You will be able to use all course materials (text, lecture notes, articles,
cases, and problem sets) on the exams but no other materials are permitted. Collaboration of any kind is
not allowed and violation of these rules will result in failure of the course.
Grading

A point system is used with points assigned as follows:

Midterm exam 100 points

Final exam 100
Cases (10 @ 10 pts.) 100
Problem Sets (10 @ 10 pts.) 100
Projects (2 @ 25 points) 50
Class participation 50
Total 500 points

Class participation points are determined by both attendance and involvement in class discussions. I
will keep track of your attendance, both during the in-person and the Zoom sessions. To achieve the full
amount of class participation points you must participate in the class discussions, not simply be present.

The total number of points accumulated determines your final course grade. I calculate the percentage
this is of the total points available and use the following scale to assign a letter grade: to receive an A of
some type you will need 90% or above, the B range is 80-89%, C's are 70-79, D’s are 60-69, and
anything less than 60% is failing. All students are expected to know and adhere to the University’s
Honor Code. The code can be found at http://myusf.usfca.edu/academic-integrity. Any copying of other
students’ work or from the Internet or any other source on problem sets, cases, projects or exams will be
considered plagiarism and will result in a 0 for that assignment. A second occurrence will result in an F
for the course.
 COURSE SCHEDULE

BUS 430: International Financial Management

Week 1

Financial Management in the MNC

Read: Chapters 1 & 4

“What Good Are Shareholders?”
“A New Purpose for the Corporation”
“Sustainability a CFO Can Love”

Week 2

The International Monetary System

Read: Chapter 2
“Two out of three ain’t bad”
“Why Weak Currencies Have a Smaller Effect on Exports”
“The new yuan: a lot like the old yuan”
“The New Money Era”

Problem Set 1: on Canvas (due 9/7)

Case 1: “The Internationalization (or Not) of the Chinese Renminbi” on Canvas (due 9/9)

Week 3

International Parity Conditions

Read: Chapter 6
“Learning to live without LIBOR”

Problem Set 2: on Canvas (due 9/14)

Case 2: “Mrs. Watanabe and the Japanese Yen Carry Trade” on Canvas (due 9/16)

Week 4

The Foreign Exchange Markets and Forecasting Exchange Rates

Read: Chapters 5 & 9

“Voice over”
“A Crackdown on Currency Hedging”
 “Forex Probe Finds New Signs of Potential Wrongdoing”
“Be good, or else”

Week 5

Foreign Currency Derivatives

Read: Chapter 7
“Invesco Cushioned Against Brexit Blow with Hedge”
“As ‘Spoof’ Trading Persists, Regulators Clamp Down”
“In Derivatives Trading, London is King”

Problem Set 3: on Canvas (due 9/28)

Case 3: “Warren Buffett’s Love-Hate Relationship with Derivatives” on Canvas (due 9/30)

Week 6

Management of Foreign Exchange Risk: Transaction Exposure

Read: Chapter 10
“Renewed Volatility Tests Treasurers”
“Turbulence in the Currency Markets-What Does It Mean for International Business?”

Problem Set 4: on Canvas (due 10/5)

Case 4: “Banbury Impex (India)” on Canvas (due 10/7)

Week 7

Management of Foreign Exchange Risk: Translation and Economic Exposure

Read: Chapters 11 & 12

“Europe’s Fashion Retailers Under Pressure from Strengthening Dollar”
“Toyota Hits Back at Yen”
“Overweight in Metal, This Band Tries to Play Tunes in Forex”

Problem Set 5: on Canvas (due 10/12)

Case 5: “Brexit and Rolls-Royce” on Canvas (due 10/14)

Week 8

Midterm Exam (10/14)

Week 9

Financing the Global Firm and the Cost of Capital

International Portfolio Investment
 Read: Chapter 13
“Shadow Banking”
“The new rulers of finance”
“Barbarians grow up”
“Who Killed Toys ‘R’ Us? Hint: It Wasn’t Only Amazon”

Problem Set 6: on Canvas (due 10/26)

Case 6: “Strategic Portfolio Theory, Black Swans, and (Avoiding) Being the Turkey” on Canvas
(due 10/28)

Week 10

The Global Debt and Equity Markets

Read: Chapter 14
“China’s markets are shaking off their casino reputation”
“Big interest, no interest”
“Verdant and vibrant”
“Investors Rewarded for Trek into Little Known Markets”

Case 7: “Korres Natural Products and the Greek Crisis” on Canvas

(due 11/4)

Week 11

Hedging Interest Rate Risk with Futures and Swaps

Read: Chapter 8
“Airlines Pull Back on Hedging Fuel Cost”

Problem Set 7: on Canvas (due 11/9)

Case 8: “McDonald’s, Hoover Hedges, and Cross-Currency Swaps” on Canvas (due 11/11)

Week 12

Foreign Direct Investment and Capital Budgeting

Read: Chapters 17 & 18

“A New Geography”
“IKEA’s India Bet Runs into Thicket of Rules”
“Better forecasting for large capital projects”

Problem Set 8: on Canvas (due 11/16)

Case 9: “Yanzhou (China) Bids for Felix Resources (Australia)” on Canvas (due 11/18)
Week 13

International Accounting and Taxation Issues

Read: Chapter 15
“New Tax Law Haunts Companies That Did ‘Inversion’
“How Uber plays the tax shell game”
“The Investment That Cost Apple $9 Billion in 2017”
“Stopping the Race to the Bottom on Taxes”
“Convergence or Conversion?”

Problem Set 9: on Canvas (due 11/23)

Case 10: “Apple’s Global Tax Strategy” on Canvas (due 11/25)

Week 14

Multinational Working Capital Management

Trade Finance

Read: Chapter 16
“What to Do With All This Cash”
“Apple Capital LLC”
“The missing link”
“Collateral damage”

Problem Set 10: on Canvas (due 11/30)

Week 15

Risk Management in the Global Firm

Current Trends in Global Finance

Read: “How JPMorgan Lost $2 Billion without Really Trying”

“Keeping Cool in the Hot Seat”
“Synergy and disruption: Ten trends shaping fintech”
“Fostering Fintech Innovation”
“The great chain of being sure about things”
“Blockchain’s Occam problem”
“The age of the appacus”