Voyevodins' Library _ "International Business: Competing in the Global Marketplace" / Charles W.L. Hill ... Chapter 20 ... subsidy, swaps, systematic risk, tariff, tax credit, tax haven, tax treaty, technical analysis, temporal method, theocratic totalitarianism, time draft, time-based competition, timing of entry, total quality management, totalitarianism, trade creation, trade deficit, trade diversion, trade surplus, trademark, transaction costs, transaction exposure, transfer fee, transfer price, translation exposure, transnational corporation, transnational financial reporting, transnational strategy, Treaty of Rome, tribal totalitarianism, turnkey project, unbundling, uncertainty avoidance, universal needs, value creation, values, vehicle currency, vertical differentiation, vertical foreign direct investment, vertical integration, voluntary export restraint (VER), wholly owned subsidiary, World Bank, World Trade Organization (WTO), worldwide area structure, worldwide product division structure, zero-sum game Voevodin's Library: subsidy, swaps, systematic risk, tariff, tax credit, tax haven, tax treaty, technical analysis, temporal method, theocratic totalitarianism, time draft, time-based competition, timing of entry, total quality management, totalitarianism, trade creation, trade deficit, trade diversion, trade surplus, trademark, transaction costs, transaction exposure, transfer fee, transfer price, translation exposure, transnational corporation, transnational financial reporting, transnational strategy, Treaty of Rome, tribal totalitarianism, turnkey project, unbundling, uncertainty avoidance, universal needs, value creation, values, vehicle currency, vertical differentiation, vertical foreign direct investment, vertical integration, voluntary export restraint (VER), wholly owned subsidiary, World Bank, World Trade Organization (WTO), worldwide area structure, worldwide product division structure, zero-sum game


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Chapter 20 Outline

Critical Discussion Questions

  1. How can the finance function of an international business improve the firm's competitive position in the global marketplace?

  2. What actions can a firm take to minimize its global tax liability? On ethical grounds, can such actions be justified?

  3. You are the CFO of a US firm whose wholly owned subsidiary in Mexico manufactures component parts for your US assembly operations. The subsidiary has been financed by bank borrowings in the United States. One of your analysts told you that the Mexican peso is expected to depreciate by 30 percent against the dollar on the foreign exchange markets over the next year. What actions, if any, should you take?

  4. You are the CFO of a Canadian firm that is considering building a $10 million factory in Russia to produce milk. The investment is expected to produce net cash flows of $3 million each year for the next 10 years, after which the investment will have to close down because of technological obsolescence. Scrap values will be zero. The cost of capital will be 6 percent if financing is arranged through the eurobond market. However, you have an option to finance the project by borrowing funds from a Russian bank at 12 percent. Analysts tell you that due to high inflation in Russia, the Russian ruble is expected to depreciate against the Canadian dollar. Analysts also rate the probability of violent revolution occurring in Russia within the next 10 years as high. How would you incorporate these factors into your evaluation of the investment opportunity? What would you recommend the firm do?
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