Finanzas Internacionales

Ejercicios de la tarea 8

Gerardo Bonilla Carrillo

Maestría en Finanzas
22 de junio de 2020
nacionales

a tarea 8

A01685351

Finanzas
de 2020

Profesor titular: Dr. Gerardo C. Salazar Viezca

Profesora Tutora: M. Karla Macías González

Capítulo 16: Preguntas 3, 8 y 11

3. Since NAFTA was established, many Asian firms, especially those from Japan and Korea, have made extensive investm
Mexico. Why do you think these Asian firms decided to build production facilities in Mexico?

As Mexico is a member of NAFTA, some interest may have arisen on the part of Asian companies to become part of NAF
be able to evade external trade barriers established by NAFTA.

8. How would you incorporate political risk into the capital budgeting process of foreign investment projects?

As an option, the cost of capital could be adjusted upwards to reflect the political risk to identify the political risk and th
to subtract the expected future cash flows considering a higher rate. Optionally, the insurance premium could be subtra
political risk factor from future cash flows to consider and use the usual cost of capital that is applied to the national cap

11. Define country risk. How is it different from political risk?

Within country risk, political risk is considered, credit risk among other types of economic returns, so its main difference
political risk is that country risk is of a greater magnitude.
e made extensive investments in

es to become part of NAFTA and thus

ment projects?

fy the political risk and thus be able

premium could be subtracted by the
pplied to the national capital budget.

rns, so its main difference with

Capítulo 17: Preguntas 1, 2 y 9

1. Suppose that your firm is operating in a segmented capital market. What actions would you recommend to mi
effects?

A good solution is to cross-list the company's shares in foreign markets, thus reducing the cost of capital of the sa
Within markets that are widely segmented, investors in these markets are forced to bear all the risk of their econ
may require a risk premium in order to assume and control that risk. Associated costs are considered, such as com
accounting and disclosure requirements, among others.

2. Explain why and how a firm’s cost of capital may decrease when the firm’s stock is cross-listed on foreign stock

If when a stock is offered abroad and becomes internationally tradable, its required return on the same stock is l
because the stock will reach a price consistent with international systematic risk rather than local systematic risk
conventional stock, the international systematic risk will present a smaller magnitude than if the local systematic
assumed.

9. Discuss foreign equity ownership restrictions. Why do you think countries impose these restrictions?

The vast majority of countries restrict the maximum fractional ownership of local companies by foreigners. In the
ensure internal control of local companies, the aforementioned restrictions are imposed.
ns would you recommend to mitigate the negative

ucing the cost of capital of the same company.

to bear all the risk of their economic activities and
osts are considered, such as compliance with

ck is cross-listed on foreign stock exchanges.

ed return on the same stock is likely to decrease

rather than local systematic risk. As is known, for a
tude than if the local systematic risk were

ose these restrictions?

companies by foreigners. In the vast majority, to

mposed.