Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

This map was prepared by an experienced editor, not by a teaching professor. Faculty at Harvard Business School were not involved in analyzing the textbook or selecting the cases and articles. Every case map provides only a partial list of relevant items from HBS Publishing. To explore alternatives, or for more information on the cases listed below, visit: http://www.hbsp.harvard.edu/educators

Note: Items marked * were recommended by text co-author Bruce Resnick.

Case Title, Authors Institution, Geographical and HBSP Industry Setting, Product Company Size, Time Number, Frame Length, Supplements/ Teaching Note availability Chapter 1: Globalization and the Multinational Firm Creating the HBS N/A International 25p Trade Product Organization Number: David A. Moss ; 798057 George Appling ;
Andrew Archer

Abstract, Subjects

In the late 1940s, officials at the U.S. State Department began campaigning for the creation of an International Trade Organization (ITO). This new organization would oversee global negotiations on trade liberalization, foreign direct investment, cartels, and commodity agreements; and it would complement the IMF and the World Bank, both of which were founded at the Bretton Woods Conference in 1944 to address international financial flows. Together, the IMF, the World Bank, and the ITO would comprise a comprehensive system for the management of international economic affairs. As it turned out, however, the proposed ITO proved controversial both within the United States and around the world. Teaching Purpose: 1) introduce students to the vital and complex role of international institutions in the global economy; 2) expose students to the special difficulties and challenges that were associated with the creation of one particular international institution, the ITO; and 3) provide students with background on the evolution of trade relations and trade policy since the midnineteenth century. Subjects: Development banks; International finance; International relations; International trade; Trade policy

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Economic Gains from Trade: Comparative Advantage (HBS Note)
Robert E. Kennedy ; Nancy Koehn

HBS 7p Product Number: 9-796-183

N/A

Note on Comparative Advantage

David B. Yoffie ; John J. Coleman

HBS6p Product Number: 9-387-023

N/A

How nations trade and whether they benefit from it are two of the oldest and most important questions in political economy. In the 170 years since David Ricardo formally developed the theory of comparative advantage, it has become one of the principles most widely accepted among professional economists. Despite this wide acceptance in the professional community, the basics of international trade are still poorly understood by many policy makers and casual commentators. This note introduces the theory of comparative advantage. It is divided into four sections. The first presents a short history of the concepts behind comparative advantage. The second develops a simple model with several examples to demonstrate the gains that result from trade between nations. The third briefly covers several extensions of the simple model. Finally, two traditional objections to free trade are reviewed. A rewritten version of an earlier note. Subjects: Business government relations; International trade; Macroeconomics; National competitiveness Discusses David Ricardo's theory of comparative advantage and the refinement of his model developed by Eli Heckscher and Bertil Ohlin. Presents several criticisms of the Heckscher-Ohlin theory, including Wassily Leontief's empirical demonstration that the nature of U.S. imports and exports were exactly contrary to the predictions of the theory. Subjects: Competition; Exports; Imports; International trade; Macroeconomics Explores the peso crisis of 1994-95 and why it occurred. Students are asked to examine Mexico's policies, the capital market's reactions, and the implications of devaluation for future capital flows and growth. Teaching Purpose: To discuss capital markets and their effects on exchange rates. Subjects: Capital markets; Foreign exchange rates; International finance; Mexico Discusses the Asian crisis and economists' opinions and solutions. Subjects: Asia; Economic conditions; International finance; Macroeconomics; Southeast Asia

Chapter 2: International Monetary System The 1994-95 HBS Mexico Case Time Mexican Peso 25p Frame Start: 1994 Crisis * Product Case Time Frame (HBS Note) Number: End: 1995 Kenneth A. Froot 9-296-056
Matthew McBrady

Collapse in Asia-1997-98 * (HBS Note)

George C. Lodge Anthony St.

HBS 24p Product Number: 9-798-084

Asia Case Time Frame Start: 1997 Case Time Frame End: 1998

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

George

The Peregrine Debacle

Michael J. Enright ; Vincent Mak

U. of Hong Kong 25p Product Number: HKU168

Asia Industry Setting: investment banking Case Time Frame Start: 1998 Case Time Frame End: 1998

In January 1998, Peregrine Investments Holdings Ltd., once billed as "Asia's only indigenous investment bank," was forced into liquidation after the revelation of huge losses in its fixed-income business and the withdrawal of potential investors from Europe and the United States. Peregrine became the highest profile corporate failure in the Asian financial crisis to date. A firm that seemed to be on top of its world in early 1997 had collapsed under a pile of bad debts less than a year later. Peregrine's demise raised questions about how the firm might have avoided the debacle. This case can be used to teach corporate governance and strategy development in volatile environments. Subjects: Asia; International finance; Investment banking; Risk management Diagnose the economic situation, evaluate the available options, and recommend a course of action. Subjects: Balance of payments; Economic policy; Fiscal policy; Inflation; Monetary policy; Southeast Asia; Unemployment

Chapter 3: Balance of Payments Thailand in May HBS and June of 1997 11p Hugo E.R. Product Uyterhoeven Number: 9-398-131

Thailand Case Time Frame Start: 1997 Case Time Frame End: 1997

Kennedy and the Balance of Payments David B. Yoffie ;

Jane K. Austin

HBS 16p Product Number: 9-383-073 Exercises available TN available

United States Case Time Frame Start: 1950 Case Time Frame End: 1960

Cross-Border Lending by Citicorp in the 1980s

Phillip A. Wellons

HBS 13p Product Number: 9-381-146 TN available

Multinational Industry Setting: banking Company Size: large Case Time Frame Start: 1979 Case Time Frame End: 1979

In 1960, the United States was facing a balance of payments problem. Gold reserves were being drained, American products were losing competitiveness, and the dollar was under attack. This case analyzes the roots of this problem, provides an opportunity to discuss in depth balance of payments accounting, and allows students to explore various solutions to balance of payments difficulties. Subjects: Balance of payments; EC single market; Economic policy; International trade; Monetary policy; National competitiveness In September 1979, Citicorp must decide whether to continue to emphasize cross-border lending to countries around the world. The return on these loans, measured by the spread between the cost of funds and the borrower's payments, has narrowed during the last few years. What factors in the environment explain the narrowing spread? What is likely to happen if oil prices rise? What are the implications for Citicorp? What are the implications for the international economy?

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Subjects: Balance of payments; Banking; Business conditions; Corporate strategy; Economic development; Financing; International banking; International finance Dr. Khor Hoe Ee, head of the Economics Department of the Monetary Authority of Singapore (MAS), is responsible for policy recommendations on Singapores exchange rate regime. Singapore had experienced strong economic growth over the previous decades, during which the MAS carefully identified a target exchange rate range and employed a managed float policy toward the countrys exchange rate. Now, Dr. Khor has to determine if this managed float policy remains consistent with the countrys economic goals and if it remains practicable in the light of recent economic upheavals in the region, most notably the Asian financial crisis. The case examines how monetary and exchange rate policy is formulated and implemented, and describes how a central bank influences exchange rates. It provides a framework for understanding the economic determinants of exchange rates and explores exchange rate regime choice. Subjects: Current account; Capital account; Real and nominal exchange rates; Fixed and floating exchange rate regimes

Exchange Rate Policy at the Monetary Authority of Singapore Mihir A. Desai; Mark F. Veblen

HBS 25p Product Number: 9-204-037 TN available

Singapore Case Time Frame: 2001

Chapter 4: Corporate Governance Around the World

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

The Hermitage Fund: Media and Corporate Governance in Russia
Alexander Dyck

HBS 24p Product Number: 9-703-010 TN available

Russia Industry Setting: investment fund Gross Revenue: $200 million revenues Number of Employees: 50 Case Time Frame Start: 2002

Incentive Strategy II: Executive Compensation and Ownership Structure

Brian Hall

HBS 44p Product Number: 9-902-134

N/A

PetroChina: International Corporate Governance with Chinese Characteristics

John Child Sang Xu ; Mary Ho

U. of Hong Kong 20p Product Number: HKU183

China Industry Setting: petroleum Case Time Frame Start: 2000

William Browder, the top executive of the Hermitage Fund, the best-performing international equity fund over the last five years, attributed much of his funds' strong returns to its focus on shareholder activism and corporate governance. In 2001, he was putting this approach to the test by accusing the Russian oil and gas giant Gazprom and the international accounting firm Price Waterhouse Coopers of not stemming governance problems. Although the press provided extensive coverage of Gazprom's problems and the share price rose, Browder failed in his other efforts to get a board seat, and his lawsuits were dismissed. Was it time to refine or change this activist strategy? These were the questions Browder (and his investors) considered as he left on a long overdue vacation. Teaching Purpose: Illustrates the extent of corporate governance problems in firms, identifies mechanisms investors can use to address concerns about misgovernance, introduces the potential role of the media as a check on corporate governance problems and how firms can use this tool as part of their strategy, and explores the opportunities and risks to shareholder activism. Subjects: Corporate governance; Media relations; Russia; Strategy formulation Used in the course Coordination, Control, and Management of Organizations at the Harvard Business School. Analyzes incentive strategy from the perspective of a company's board of directors and owners. The focus is the role that executive compensation and ownership structure (the composition of, and financial structure between, a company's owners) play in motivating valuecreating behavior. Teaching Purpose: To synthesize and summarize the course. Subjects: Corporate governance; Executive compensation; Incentives; Options; Stocks PetroChina, the largest oil and gas company in China, was made a showcase for sound corporate governance in China's state-owned enterprises (SOEs). Its initial public offering (IPO) was part of the government's plan to lay the groundwork for other large capital-starved SOEs on the global capital market. In spite of the restructuring efforts, some analysts felt that the company was not yet close to where it needed to be in terms of

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

international governance standards. Teaching Purpose: To expose students to the range of issues relating to corporate governance with Chinese characteristics. In analyzing China's political and economic background and PetroChina's governance model, this case demonstrates that the corporate governance system in China offers limited protection for minority shareholders. Subjects: Business government relations; China; Corporate governance; Petroleum industry

Corporate Renewal in America

Bruce R. Scott Thomas S. Mondschean

HBS 32p Product Number: 9-702-018

United States Case Time Frame Start: 1960 Case Time Frame End: 2001

Discusses various macroeconomic, regulatory, technological, and financial forces that led to increased corporate restructuring in the United States beginning in the mid-1980s. The U.S. financial system is often viewed as the most developed in the world and a model for other countries to follow. Similarly, the U.S. model of corporate governance--with its emphasis on shareholder value and an active market for corporate control--is also viewed as a model. Examines pressures for corporate restructuring and the emergence of an active market for corporate control for very large firms beginning in the early 1970s. Discusses the effects of this restructuring on corporate profitability and productivity. Provides data on the evolution of a number of indicators of performance, including productivity by sector, market capitalization relative to replacement cost, and rates of return both on assets and on equity. In brief, it finds that U.S. firms showed significantly improved after-tax returns on shareholder equity over the period while failing to make significant improvements on their pre-tax returns on assets--adjusted for the effects of the business cycle. Given the lack of comparable accounting data on returns across countries, conclusions about the performance of U.S. firms versus European ones isn't possible. Teaching Purpose: To compare and evaluate German, Japanese, and U.S. financial systems. Also, to discuss how a financial system like the United States' has been driven largely by market rather than policy forces. Subjects: Corporate

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

governance; Macroeconomics; Productivity; Profitability; Restructuring Several investment firms and mutual funds position themselves as providers or facilitators of opportunities for socially responsible investment. This case addresses the impact of these firms on publicly traded companies. Focuses on managers at ABB, a large multinational based in Switzerland that has tried to be a leader in integrating principles of sustainable development into its business strategies. ABB's managers now need to decide what sorts of relationships they would like to have with the firms in the socially responsible investment community, and the extent to which they ought to take the preferences of these firms into account in tailoring their business strategies. Teaching Purpose: Understand the channels through which environmentally and socially "proactive" behavior might be rewarded in the capital markets, and assess the likelihood that these rewards will actually materialize; understand the possible value propositions of firms that offer services relating to socially responsible investment. Subjects: Business & society; Corporate governance; Electric industries; Environmental protection; Ethics; International business; Manufacturing; Mutual funds; Social enterprise; Switzerland

Sustainable Development and Socially Responsible Investing: ABB in 2000

Forest Reinhardt

HBS 37p Product Number: 9-701-082

Switzerland Industry Setting: electrical equipment Gross Revenue: $25 billion revenues Number of Employees: 161,000 Case Time Frame Start: 1998 Case Time Frame End: 2000

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

The Board's Missing Link
Cynthia A. Montgomery Rhonda Kaufman

HBR Reprint 7p Product Number: r0303f

The causes of many corporate governance problems lie well below the surface--specifically, in critical relationships that are not structured to support the players involved. In other words, the very foundation of the system is flawed. And unless we correct the structural problems, surface changes are unlikely to have a lasting impact. When shareholders, management, and the board of directors work together as a system, they provide a powerful set of checks and balances. But the relationship between shareholders and directors is fraught with weaknesses, undermining the entire system's equilibrium. As the authors explain, the exchange of information between these two players is poor. The authors suggest several ways to improve the relationship between shareholders and directors: Increase board accountability by recording individual directors' votes on key corporate resolutions, separate the positions of chairman and CEO, reinvigorate shareholders, and give boards funding to pay for outside experts who can provide perspective on crucial issues. Subjects: Board of directors; Corporate governance; Corporate responsibility; Shareholder relations Only in the waning years of the 20th century did international financial markets begin to enjoy the freedom from government regulation that they had experienced before the first world war. By 2002, international capital markets had grown to be enormous--$1.2 trillion flowed around the globe per day. The massive size of the market presented policy makers with a serious challenge, as they were forced to grapple with the costs and benefits of such mobile capital. This note briefly relates the modern history of capital controls and summarizes scholarship on the advantages and disadvantages of international financial market regulation. Teaching Purpose: The advantages and disadvantages of international financial market regulation. Subjects: Business government relations; Economic development; Foreign exchange; Government policy; International banking; International finance; Policy making

Chapter 5: The Market for Foreign Exchange Capital Controls HBS N/A (HBS note) 6p Rawi Abdelal ; Product Laura Alfaro Number: 9-702-082

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Exchange Rate Exercise
Robert E. Kennedy

HBS 3p Product Number: 9-701-122

N/A

Alphatec Electronics Pcl

Stuart C. Gilson ; Perry L. Fagan ; C. Fritz Foley

HBS 30p Product Number: 9-200-004

Thailand Industry Setting: semiconductors/high technology Gross Revenue: $250 million U.S. revenues Number of Employees: 20,000 Case Time Frame Start: 1997 Case Time Frame End: 1999

Note on Foreign Exchange* Scott P. Mason ;

William B. Allen

HBS 15p Product Number: 9-286-067

N/A

Note on Foreign Currency Swaps

W. Carl Kester

HBS 11p Product Number: 9-292-043 TN available

N/A

Tests students' understanding of exchange rate analytics and how shifts in exchange rates affect firms' economics. Teaching Purpose: To reinforce exchange rate lessons. Subjects: Currency; Devaluation; Economic analysis; Emerging markets; Foreign exchange rates; International business The newly appointed CEO of an important hightechnology company in Thailand must lead the company through a complicated debt restructuring. Due to the collapse of the Thai currency, the company's debt burden, like that of most Thai companies, has skyrocketed because it has borrowed heavily in U.S. dollars. The new CEO, who is a U.S. citizen, must restructure the company under the recently revised, and largely untested, new Thai bankruptcy law. The new law allows troubled companies to reorganize their businesses following an approach that is similar, but not identical, to that practiced in the United States under Chapter 11 of the Bankruptcy Code. Teaching Purpose: Restructuring financially distressed companies in a non-U.S. setting, understanding the impact of dramatic exchange rate shocks on corporate valuation, and understanding the impact of legal rules and systems on corporate resource allocation. Subjects: Bankruptcy; Foreign exchange rates; Restructuring; Semiconductors; Southeast Asia; Valuation Describes the operation of foreign exchange markets, including bid-offer spreads, cross rates, reciprocal rates, and forward rates. Provides several examples to demonstrate calculation of outright forward rates using discount and premium points quoted in the London Financial Times. Other examples demonstrate interest rate parity, and hedging foreign debt using long-dated forwards. Subjects: Capital markets; Currency; Foreign exchange; Hedging; Interest rates Provides descriptive background about the development of an international market for currency swaps and, by means of a detailed example, instructs readers in the determination of swap flows and all-in costs of financing using market swap rates. A rewritten version of an

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

earlier note. Subjects: Capital markets; Currency; Foreign exchange; Hedging; International banking; International finance This note first describes the foreign exchange market and explains the basic calculations required to employ exchange rates, determine cross exchange rates, and measure currency depreciations and appreciations. The note then looks at forwards, futures, swaps and options and explores why firms use these derivative instruments. Finally, the note introduces some of the economic determinants of exchange rates, using examples to illustrate interest rate parity and purchasing power parity. The note includes a problem set so readers can practice and consolidate their understanding of exchange rates. Subjects: Economic determinants; Exchange rate transactions; Derivative instruments

Foreign Exchange Markets and Transactions Mihir A. Desai, Christina B. Pham, Katheleen Luchs, Yanjun Wang

HBS 28p Product Number: 9205-016 TN available

Global Case Time Frame: 2003

Chapter 6: International Parity Relationships and Forecasting Foreign Exchange Rates Note on HBS N/A Fundamental 9p Parity Product Conditions* Number: W. Carl Kester 9-288-016 TN available

MSDI-Alcala de Henares, Spain

Timothy A. Luehrman ; James J. Student

HBS 6p Product Number: 9-289-029 TN available

Spain Industry Setting: pharmaceuticals Company Size: Fortune 500 Case Time Frame Start: 1987 Case Time Frame End: 1987

Provides a simple framework for analyzing expected exchange rate movements. Basic parity and equilibrium conditions are presented including purchasing power parity, forward parity, interest rate parity, the domestic Fisher effect, and the international Fisher effect (Fisher open). Empirical evidence about these conditions is discussed. References are provided. Subjects: Capital markets; Foreign exchange; Foreign exchange rates; International finance Merck & Co., Inc. is evaluating a proposed costsaving investment by its Spanish subsidiary. The case introduces techniques of discounted cash flow valuation analysis in a multicurrency setting. Can be used to teach basic international parity conditions as they relate to the value of operating cash flows. Subjects: Europe; Foreign exchange rates; International finance; Pharmaceuticals; Project evaluation; Securities analysis; Valuation The Chicago Mercantile Exchange needs to decide how to design, and whether and when to introduce, a futures contract on the Mexican peso. Subjects: Commodity markets; Country analysis; Foreign exchange rates; International finance;

Chapter 7: Futures and Options on Foreign Exchange Futures on the HBS Mexico/United States Mexican Peso* 22p Industry Setting: Kenneth A. Froot Product financial services Matthew McBrady Number: Case Time Frame ; Mark Seasholes 9-296-004 Start: 1995 Case

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Time Frame End: 1995 Chapter 8: Management of Transaction Exposure Note on HBS Transaction and 10p Translation Product Exposure * Number: W. Carl Kester ; 9-288-017 Richard P. Melnick TN available Mexico; Money; Money markets

Metallgese llschaft AG
David F. Hawkins ; Guy Weyns

HBS 5p Product Number: 9-194-097

Germany Industry Setting: oil trading Gross Revenue: $7.2 billion DM Case Time Frame Start: 1993 Case Time Frame End: 1994

Describes the transaction and translation exposures that companies doing business internationally face when foreign exchange rates change. Also discusses how to measure and cover both types of exposure. Covering techniques are demonstrated using examples of forward cover, money market hedges, and options market hedges. Other covering devices, such as swaps and leads and lags, are also presented. Explains how these exposures relate to each other and what can be done to minimize overall foreign exchange risk. Subjects: Accounting procedures; Foreign exchange; Foreign exchange rates; International finance; Management accounting Metallgesellschaft AG is a commodity and engineering conglomerate based in Frankfurt am Main, Germany. Metallgesellschaft Corp., a New York based subsidiary of the group, has made oil trading and hedging errors that could drive the group into insolvency. The impact of hedge accounting rules on the quality of the information available to top management is examined. Teaching Purpose: To illustrate the fundamental issues in accounting for hedges and to show the tradeoffs that have to be made when choosing between deferral hedge accounting and mark-tomarket-hedge accounting. Subjects: Accounting procedures; Conglomerates; Germany; Hedging; International finance Describes Philips Electronics' policies and problems relating to foreign exchange risk and hedging. Explains centralization versus decentralization of currency hedging; economic role versus transaction role; the difficulties of capturing the necessary information centrally; and assigning currency gains and losses in a matrix system of management. Teaching Purpose: To show the problems of implementing a foreign currency hedging system in a very large, multidivisional global corporation. Subjects: Currency; Electronics; Europe; Foreign exchange; Foreign exchange rates; Hedging; Risk management

N.V. Philips Electronics: Currency Hedging Policies

Richard F. Meyer

HBS 18p Product Number: 9-295-055

Finance Geographic Setting: Global Industry Setting: electronics Company Size: large Case Time Frame Start: 1990 Case Time Frame End: 1990

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Aspen Technology, Inc.: Currency Hedging Review Peter Tufano ;
Cameron Poetzscher

HBS 19p Product Number: 9-296-027 TN available

New England/Global Industry Setting: software Company Size: small Gross Revenue: $57 million revenues Number of Employees: 417 Case Time Frame Start: 1995 Case Time Frame End: 1995

Hedging Currency Risks at AIFS Mihir A. Desai; Vincent Dessain; Anders Sjman

HBS 17p Product Number: 9-205-026 TN available

Global Industry Setting: Student travel services Case Time Frame: 2004

The chief financial officer of a rapidly-growing U.S.-based software firm that sells its processcontrol software to industrial users around the globe must review the goals, strategies, and policies of the firm's currency hedging program. This review is prompted by changes in the firm's business, notably its acquisition of a United Kingdom subsidiary, other growing overseas expenses, and its recent initial public offering. Teaching Purpose: Intended to allow students to analyze how a small, young firm's business strategy creates currency exposure and a need to manage this exposure. Designed to allow students to explore the goals and purposes of currency hedging, the measurement of exposures, and appropriate policies to be followed. Subjects: Foreign exchange; Hedging; Risk assessment; Risk management; Software AIFS organizes academic and cultural exchanges for students, sending over 50,000 American students abroad each year for study programs and tours. Revenues are largely in U.S. dollars while costs are largely in euros. AIFS sets prices for the programs months in advance and guarantees its prices once they are published in its catalog. Every year, Controller Christopher Archer-Lock and CFO Becky Tabaczynski must decide whether to hedge a euro-dollar exposure before they know the magnitude of the exposure. They have to make hedging decisions well before the company knows how many students will sign up for its programs. Currency fluctuations and international crises can have a severe impact on sales volume. ArcherLock and Tabaczynski have to quantify the exposure created by this mismatch in costs and revenues and/or different exchange rate scenarios and also want to explore the implications ofo using various mixes of forwards and options in their hedging strategy. Subject: Foreign exchange exposures; Hedging; Volume uncertainty Describes the effects on operating cash flows of a real change in exchange rates. Describes different elements of operating exposure and includes illustrative examples. Subjects: Currency; Foreign exchange rates; International finance; International operations

Chapter 9: Management of Economic Exposure Note on HBS N/A Operating 11p Exposure to Product Exchange-Rate Number: Changes * 9-288-018 Timothy A. TN available

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Luehrman

Tiffany & Co.-1993* W. Carl Kester ;

Kendall Backstrand

HBS 12p Product Number: 9-295-047 TN available

Global Industry Setting: retail jewelry Company Size: midsize Gross Revenue: $500 million revenues Case Time Frame Start: 1993 Case Time Frame End: 1993

The restructuring of Tiffany's retailing agreement with Mitsukoshi Ltd. in 1993 exposed Tiffany to substantial yen/dollar exchange rate volatility that it had not previously faced. This new exposure requires Tiffany to establish risk management policies and practices. Management must determine whether to hedge, what the objective of hedging ought to be, how much exposure to cover, and what instruments to use. Teaching Objective: To introduce students to the problems of risk management in a relatively uncomplicated administrative situation. Subjects: Currency; Foreign exchange rates; Retailing; Risk management The manager of international finance of a major U.S. electronics company is concerned about the exposure of the firm to changes in exchange rates. Of particular concern is the exposure of operations to changes in real exchange rates. The teaching objectives include: 1) understanding operating exposure and contractual exposure; 2) understanding the issues in estimating operating exposure; 3) understanding possible actions to neutralize operating exposure; and 4) assigning responsibility for the management of operating exposure. Subjects: Electronics; Financial management; Foreign exchange rates; International finance Provides a framework for introducing the analysis of costs of financing for different currency choices. Allows for the measurement of the foreign exchange risk and its impact on the firm's financing costs as well as its operating margin. Also deals with the links between the firm's competitive position and its choice of financing. Teaching Purpose: Provides basis for discussion on the concept of economic exposure and describes how a domestic firm is exposed to foreign exchange risk. Subjects: Debt management; Europe; Financial analysis; Food; Foreign exchange; International finance; Risk After an LBO and near bankruptcy in the early 1980s, Harley-Davidson makes an astonishing recovery, going public in 1986. Its listing on the

Universal Circuits, Inc. *

Thomas R. Piper

HBS 13p Product Number: 9-286-006 TN available

United States Industry Setting: electronics Company Size: mid-size Gross Revenue: $200 million sales Case Time Frame Start: 1984 Case Time Frame End: 1984

Ibersnacks, S.A. *
Donald R. Lessard ; Ahmad Rahnema

IESE 8p Product Number: IES017 TN available

Spain Industry Setting: snack foods Case Time Frame Start: 1992 Case Time Frame End: 1992

HarleyDavidson, Inc.-1987 *

HBS 18p Product

United States Industry Setting: motorcycles

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

W. Carl Kester ; Julia Morley

Number: 9-292-082

Company Size: Fortune 500 Gross Revenue: $300 million revenues Case Time Frame Start: 1987 Case Time Frame End: 1987

Jaguar plc-1984*
Timothy A. Luehrman ; William T. Schiano

HBS 13p Product Number: 9-290-005 TN available

United Kingdom Industry Setting: automobile Company Size: large Gross Revenue: $750 million sales Case Time Frame Start: 1984 Case Time Frame End: 1984

New York Stock Exchange in 1987 provides the occasion of an equity analyst to publish a research report in which she must issue a buy, sell, or hold recommendation for Harley's stock. Complicating her analysis is the fact that Harley still faces vigorous Japanese competition and, therefore, has a significant operating exposure to the yen/dollar exchange rate. Stimulates discussion about operating exposure to real exchange rate changes. Subjects: Foreign exchange rates; International business; International finance; Motorcycles; Valuation A vehicle for analyzing the exposure of operating cash flows to exchange rate changes. Considers the value of Jaguar plc at the time of its privatization and share offering in 1984. Jaguar is a major exporter from the United Kingdom and the United States is therefore exposed to changes in the dollar/sterling exchange rate. Students are asked to estimate the value of the company as a function of expected future exchange rates. Students may also be asked whether and how Jaguar's exposure should be hedged. Subjects: Automobiles; Foreign exchange rates; Industry analysis; International finance; Privatization; Stock offerings; Valuation

Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures Mihir A. Desai; Mark F. Veblen

HBS 9p Product Number: 9-205-096 TN available

Global Industry Setting: auto Case Time Frame: 2001

Eric Feldstein is responsible for managing foreign currency risks at General Motors. Currency exposures that arise from transactions in foreign currencies are mostly addressed by the companys corporate hedging policy. The companys hedging policy, however, does not address all of the risks that GM faces from changes in exchange rates. Although GM sells few cars in Japan, Feldstein perceives that GM has a significant competitive exposure to the yen. Feldstein reasons that an anticipated depreciation of the yen against the U.S. dollar would give Japanese automakers a sizable cost advantage relative to GM in the U.S. market, thus allowing them to take market share away from GM and other U.S. car makers. GMs competitive exposure to the yen is a long-standing strategic concern among GM executives, but discussions on what to do about it have been

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

largely hypothetical. As a consequence, Feldstein aims to develop an analytic framework to quantify GMs yen exposure to allow GM to better manage the risks that arise from this competitive exposure. Subjects: Competitive exposures; Financial consequences Chapter 10: Management of Translation Exposure Machinery HBS United States Gross International (A) 6p Revenue: $5 million David F. Hawkins Product Case Time Frame Number: Start: 2000 Case 9-100-012 Time Frame End: B case 2000 available TN available A U.S. company must decide how to translate its German subsidiary's DM financial statements into U.S. dollars for public and internal reporting purposes. Teaching Purpose: Explore financial and behavioral implications of different approaches to translation of financial statements from one currency to another. A rewritten version of an earlier case. Subjects: Accounting procedures; Currency; Financial accounting; Financial reporting; Germany; Machinery The treasury team at General Motors (GM), headed by Eric Feldstein, is responsible for managing the corporations varied financial transactions and their associated risks. With operations and subsidiaries all over the world, GM has exposure to numerous currencies. The companys hedging policy defines what exposures should be hedged and how the prescribed hedges should be implemented. GMs passive hedging strategy is intended to minimize management time and discretion spent on hedging decisions and does not usually accommodate hedging translational exposures. Exceptions to the hedging policy must be approved by Feldstein who is currently reviewing two much proposals for the Canadian dollar and the Argentinean peso. Feldstein and his team have to evaluate GMs exposure to each currency, determine the risks, consider other approaches to managing these currency risks, and decide if GM should depart from its formal hedging policy. If Feldstein does approve exceptional hedges for one or both of these currencies, he must also consider what instruments to use to implement the hedges. The two currencies pose different problems for General Motors. The firm has a large transactional exposure to the Canadian dollar, and a sizable translational exposure. Feldstein must determine

Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures Mihir A. Desai; Mark F. Veblen

HBS 24p Product Number: 9-205-095 TN available

North and South America Industry Setting: auto Case Time Frame: 2001

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

how fluctuations in the U.S. dollar/Canadian dollar exchange rate would impact GMs income statement, and also consider the longer term implications of the firms exposure to the Canadian dollar. In effect, the GM policy does not regularly allow hedging of translational exposures but the CAD exposure is substantial enough to merit review. In the case of the Argentinean peso, Feldstein has to decide how GM should deal with the widely anticipated devaluation of the peso. Would it be cost-effective for GM to hedge more of its exposure, or are there other actions that GM might take to mitigate the effects of a peso devaluation? Subjects: Exchange rate risks; Hedging; Imminent devaluation Chapter 11: International Banking and Money Market CSFB's China U. of Hong China Industry Unicom Incident Kong Setting: investment Michael J. Enright 20p banking Case Time ; Vincent Mak Product Frame Start: 2001 Number: Case Time Frame HKU187 End: 2001 In August 2001, Credit Suisse First Boston (CSFB), a major international investment bank, was removed from the foreign underwriting team that would handle a pending share offering for China Unicom Group Ltd., the second largest telecommunications company in the Chinese Mainland. Only two months earlier, CSFB was designated to deal with the U.S. portion of that offering. However, after the bank hosted overseas investment "road shows" attended by senior government officials from Taiwan (including the finance minister), it was officially dropped from the China Unicom underwriter list. The incident provoked criticism from governments in the United States and Taiwan and widespread activity in investment banking circles as several other banks dropped plans to host road shows for Taiwan. Teaching Purpose: To teach how business decisions may become caught up in political difficulties and how companies need to formulate strategies and policies to address such issues. Subjects: Asia; Business government relations; China; International finance; Investment banking; Politics; Strategy formulation On September 1, 1998 the government of Malaysia imposed currency and capital controls in response to the financial crisis that had swept Asia. The controls sparked an enormous controversy in the world of international finance. Some celebrated the controls for insulating the Malaysian economy from the unstable international financial system.

Malaysia: Capital and Control Rawi Abdelal ; Laura

Alfaro

HBS 31p Product Number: 9-702-040

Malaysia Industry Setting: government Case Time Frame Start: 1997 Case Time Frame End: 2002

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Others criticized the controls for trapping investors and allowing the government to protect the interests of "cronies." This debate also raised the central question about the future of the international financial architecture: What is the appropriate balance between financial market freedom and government discretion in the management of the global economy? Teaching Purpose: The political economy of capital controls in Malaysia during the Asian financial crisis. Subjects: Asia; Business government relations; Country analysis; Economic development; Emerging markets; Government policy; International banking; International finance In 1994, Greece's Alpha Credit Bank funded a new bank in Romania through its investment banking subsidiary, Alpha Finance. The Romanian bank, called the Banca Bucuresti (or Bank of Bucharest) became the first fully-licensed, foreign-owned bank in the country since the beginning of the post-Communist transition in 1990. As the Greek bank set up Romanian operations, Panagis Vourloumis, the venture's managing director, learned quickly the difficulties and risks of doing business in such an unstable economic environment. In 1996, after two years in Romania, he wondered whether to sell the bank and make money in the short term, or to take a longer-range view. Teaching Purpose: Describes the complex process of establishing a financial services business in a country without the basic institutions of market capitalism. Subjects: Banking; Developing countries; Eastern Europe; Financial services; International banking; International finance; International operations; Political process In December 1999, Newbridge Capital, an equity investment fund based in San Francisco, successfully negotiated with the Korean government to acquire controlling interest in Korea First Bank. It was the first time ever a foreign financial institution acquired a Korean Bank. The negotiation was difficult and protracted, and the two sides tried hard to reach an agreement that would preserve the interests of both. The case examines the conditions and the motivations underlying one of the most significant acquisition deals in the Korean economy. Teaching Purpose:

Banca Bucuresti Debora Spar ;

Laura Bures

HBS 22p Product Number: 9-797-063

Romania/Greece Industry Setting: financial Case Time Frame Start: 1993 Case Time Frame End: 1996

Korea First Bank (A) Yasheng Huang ;

Kirsten J. O'NeilMassaro

HBS 26p Product Number: 9-701-022 Supplement available TN available

Seoul, South Korea Industry Setting: banking Gross Revenue: $250 million revenues Number of Employees: 4,829 Case Time Frame Start: 1997 Case Time Frame End: 2000

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To teach the complexities involved in an acquisition of a bank in a previously closed financial system. Subjects: Acquisitions; Financial institutions; Foreign investment; Globalization; Government policy; International banking; International business; Korea; Mergers On January 1, 1999, 11 European countries unified their currencies--48 years after their first integrative efforts. This marks a huge development in the structure of Europe and the world's economy. This case examines the integrative process, the Single Europe Act and its impact on market structure during the past 13 years, and monetary union. Provides data as of 1998 on European macroeconomics integration and data in the mid-1990s on integration of product markets, capital markets, and labor markets. Subjects: Business government relations; Competition; Currency; EC single market; Eurodollars; Europe; International business; Macroeconomics Supplements case listed above. Subjects: Business government relations; Competition; Currency; EC single market; Eurodollars; Europe; International business; Macroeconomics

European Monetary Union

Richard H.K. Vietor ; Sabina Ciminero

HBS 32p Product Number: 9-799-131 Supplement available TN available

N/A

European Monetary Union: Honeywell Europe

Richard H.K. Vietor ; Sabina Ciminero

4p Product Number: 9-799-151

N/A

Chapter 12: International Bond Market Hutchison Ivey Hong Kong Industry Whampoa Ltd.: School/UWO Setting: investments 26p The Capital Company Size: large Product Structure Case Time Frame Number: Decision Start: 1996 Case Andrew Karolyi ; 99N021 Time Frame End: Larry Wynant ; TN available 1996 Geoff Crum ; Peter
Yuan

Hutchison Whampoa was considering strategies for its long-term capital structure. The HK$35 billion Hong Kong-based conglomerate had ambitious growth plans in multiple business sectors in different geographies. Traditionally, like many of its domestic peers, Hutchison had relied entirely on short- to medium-term bank loans. Its demand for long-term financing, attractive rates in other capital markets (especially the United States), and concern about a more diversified investor base had led Hutchison to explore other financing options. In particular, the company was debating the benefits of a Yankee Bond Offering. At the time, Hutchison had already approached Moody's and Standard & Poor's for a bond rating. Subjects: Capital budgeting; China; Financial strategy; International finance

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

European Bank for Reconstruction and Development: Marketing Strategy for the Debut Bond Offering
Jeffrey F. Rayport

HBS 23p Product Number: 9-594-005 TN available

London/Eastern Europe Industry Setting: financial services/investment banking Case Time Frame Start: 1991 Case Time Frame End: 1991

Walt Disney Co.'s Yen Financing

W. Carl Kester ; William B. Allen

HBS 11p Product Number: 9-287-058 TN available

United States Industry Setting: consumer/entertainm ent Company Size: large Gross Revenue: $1.7 billion sales Case Time Frame Start: 1985 Case Time Frame End: 1985

The European Bank for Reconstruction and Development, the first supranational financial institution of the post-Cold War era, is planning its debut in the international capital markets through a bond issuance of $500 million. The bank must determine its marketing strategy for the offering on two levels--positioning of the institution and of the bond offering itself. Integral to the marketing task is the selection of a lead manager, who will determine the marketing mix. The mix decisions involve determining product (currency, maturity, coupon), pricing (yield), promotion (road shows and media relations), and distribution (formation of the syndicate). In addition, the lead manager will need to select appropriate target markets (retail and institutional investors), along with overall positioning for the institution. Subjects: Banking; Bonds; Eastern Europe; International banking; Investment banking; Marketing strategy; Pricing; Social Walt Disney is considering hedging future yen inflows from Disney Tokyo. It is evaluating techniques using FX Forwards, swaps, and Yen term borrowings. Goldman Sachs presents a rather unusual but potentially attractive solution: Disney could issue ECU Eurobonds and swap into a Yen liability. The case explains how this alternative would work and suggests to the students ways to evaluate the hedging choices. Subjects: Bonds; Capital markets; Currency; Hedging; International finance

Note on the Eurodollar Debt Market Scott P. Mason ;

William B. Allen

HBS 19p Product Number: 9-286-063

Describes the historical development of Eurodollar debt, with particular emphasis on fixed rate bonds and floating rate notes. Provides an analysis of issuers, investors and intermediaries. Subjects: Bonds; Capital markets; International banking; International finance Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio

Chapter 13: International Equity Markets Global Equity HBS N/A Markets: The 19p Case of Royal Product

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Dutch and Shell*
Kenneth A. Froot Andre F. Perold

Number: 9-296-077 TN available

Compania de Telefonos de Chile *

W. Carl Kester ; Enrique Ostale ; Charles M. La Follette

HBS 21p Product Number: 9-293-015 TN available

Chile Industry Setting: telecommunications Company Size: midsize Gross Revenue: $375 million revenues Number of Employees: 7,000 Case Time Frame Start: 1990 Case Time Frame End: 1990

Huaneng Power International, Inc.: Raising Capital in Global Markets *

Steve R. Foerster Andrew Karolyi Jerry White

Ivey/UWO 26p Product Number: 98N001

China Industry Setting: electric, gas and sanitary services Company Size: large Case Time Frame Start: 1994 Case Time Frame End: 1994

is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more actively in the Netherlands and U.S. markets, whereas Shell trades more actively in the United States. The result is that the Royal Dutch/Shell relative price moves positively with the Netherlands and U.S. markets and negatively with the U.K. market. The ability to arbitrage these disparities and their causes are major case focal points. Teaching Purpose: To demonstrate how valuation is affected by the location of trade/ownership, and why arbitrage doesn't lead to integration of international financial markets. Subjects: Capital markets; International finance; Securities; Valuation The newly privatized Chilean telephone company, Compania de Telefonos de Chile (CTC) must raise substantial new funds externally in order to finance its expansion program. This task is complicated by Chile's small, illiquid capital markets and the skeptical view of Latin American borrowers held by investors outside of the region. CTC's chief financial officer must determine if listing American Depository Receipts (ADRs) on the New York Stock Exchange is a viable financing option for the company. Subjects: Capital markets; Equity financing; International finance; South America; Telecommunications It is early October 1994, and Huaneng Power International (HPI), an independent power producer in the People's Republic of China (PRC), is in the process of executing a global equity issue to raise funds for the construction of new power plants. The company is planning to list the new shares through an American Depositary Receipt program on the New York Stock Exchange. The company has recently reduced the price of the issue due to poor market conditions and investor resistance to the price range stated in the preliminary prospectus. The student must decide, as HPI management, whether the new offer price and choice of listing exchange is reasonable in light of recent market events and the political, economic, social, and technological environment in the PRC. Subjects: China; Electric power; International

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

finance; Stock offerings; Valuation

Chapter 14: Interest Rate and Currency Swaps Note on Foreign HBS N/A Currency Swaps* 11p W. Carl Kester Product Number: 9-292-043 TN available

Gaz de France* W. Carl Kester ;

William B. Allen

HBS 19p Product Number: 9-288-030 TN available

France Industry Setting: natural gas Company Size: large Gross Revenue: $8.5 billion revenues Case Time Frame Start: 1986 Case Time Frame End: 1986

J.C. Penney (B)* Scott P. Mason ;

William B. Allen

HBS 23p Product Number: 9-286-118 TN available

New York Industry Setting: retailing Company Size: large Gross Revenue: $13 billion sales Case Time Frame Start: 1985 Case Time Frame End: 1985

Provides descriptive background about the development of an international market for currency swaps and, by means of a detailed example, instructs readers in the determination of swap flows and all-in costs of financing using market swap rates. A rewritten version of an earlier note. Subjects: Capital markets; Currency; Foreign exchange; Hedging; International banking; International finance The treasurer of Gaz de France is an aggressive, proactive manager of his company's liability structure, running one of the largest swap books of any non-financial corporation in the world. Currency futures, interbank forwards, and currency options are also frequently used to control the company's multi-currency liability structure. This case prompts students to explore the reasons and ramifications of such aggressive liability management, with particular attention being paid to the administrative challenges created by such a large swap position. An important decision has to be made regarding the management of the swap book in the face of the depreciating dollar, the decline of the franc against the German mark, and a possible realignment of the European Currency Unit. This is a comprehensive case involving swaps, debt policy, and foreign exchange exposure that is best taught after students have been introduced to these topics. Subjects: Debt management; Foreign exchange; France; International finance; Natural gas Penney's assistant treasurer was considering various capital markets issues to finance store modernizations. This case provides the financing terms available to Penney for domestic, current, and zero coupon debt. Eurodollar debt, and nondollar SFr and Yen issues hedged and swapped back to dollar liabilities. Also, Penney is considering using interest rate futures, options, and options on futures to hedge a forthcoming debt

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

issue. Subjects: Bonds; Capital markets; International finance Reynolds must source a substantial portion of the financing of its Nabisco acquisition in offshore bond markets. Morgan Guaranty has proposed a yen/dollar dual currency Eurobond that could be hedged into dollars. This structure is compared to Eurodollar Bonds, Euroyen Bonds, and Euroyen Bonds swapped or hedged into dollars. Subjects: Bonds; Capital markets; Currency; Hedging; International finance

R.J. Reynolds International Financing *

United States Industry Setting: capital markets W. Carl Kester ; Company Size: William B. Allen Fortune 500 Gross Revenue: $13 billion sales Case Time Frame Start: 1985 Case Time Frame End: 1985 Chapter 15: International Portfolio Investment Acer Computec HBS Mexico, United Latino America 13p States Industry Alberto Moel ; Product Setting: computers Markus F. Number: 9Gross Revenue: $323 Mullarkey 299-024 million revenues Case Time Frame Start: 1996 Case Time Frame End: 1996

HBS 14p Product Number: 9-287-057

Merrill Lynch's Acquisition of Mercury Asset Management Andre F. Perold ; Imran Ahmed ;
Randy Altschuler

HBS 29p Product Number: 9-299-005

Global Industry Setting: money management Case Time Frame Start: 1998 Case Time Frame End: 1998

Acer Computer Latino America, a joint venture between leading Taiwanese computer manufacturer Acer and a group of Mexican and Chilean investors, was completing preparations for its long-awaited IPO in Mexico. The company had hoped to go public well before, but Mexico's 1994 devaluation had derailed the firm's offering. However, market conditions in Mexico were still unsettled, and in order to prevent a weak offering, the firm was considering including an American Depositary Receipt (ADR) issue in the offering plans. The case deals with the institutional context, costs, and benefits of an ADR issue, and with the strategic and tactical details involved in an ADR listing. Teaching Purpose: To introduce students to ADRs, and to present the issues involved in a cross-border initial public offering. Subjects: Capital markets; Computer industry; Financing; IPO; Joint ventures; Mexico; Underwriting In the Spring of 1998, Merrill Lynch faced an array of challenges and opportunities related to its global asset management business. The firm had recently completed its $5.3 billion cash acquisition of U.K.-based Mercury Asset Management. Merrill Lynch now would manage assets across the globe with a balanced mix of retail/institutional accounts, fixed income/equity assets, and domestic/international exposures. Provides an opportunity to analyze the future of the asset management industry from a global perspective, with emphasis on the changes occurring in Europe as it moves to a common currency, and on Japan,

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

which is undergoing a major reorganization of its financial system. Teaching Purpose: A vehicle for discussing 1) issues such as the phenomenon of home bias: Will investors diversify more broadly than at present, and what does this mean for the products and strategies of investment firms?, and 2) issues relating to branding, distribution, and production in a world where assets are increasingly coming under the control of individuals through the growth of self-directed retirement plans. Subjects: Acquisitions; Asset management; Investment management; Mutual funds; Pension funds Sandra Meyer, founder of the investment firm CapGlobal Advisors, LLC, has to present the case for international diversification to a skeptical client who is responsible for a state pension fund. Foreign equities have underperformed U.S. equities for some time, and the client wonders if the pension fund is losing out on potential returns by investing in international stock markets that are underperforming the U.S. market. Meyer plans to use data on international stock returns and currency movements to convince her client that international diversification does add value to the pension funds equity portfolio and to demonstrate how currency movements influence international stock returns. Subjects: International portfolio diversification; Analyze large data sets; Home bias; Portfolio formation

Innocents Abroad: Currencies and International Stock Returns* Mihir A. Desai; Kathleen Luchs; Mark F. Veblen

HBS 21p Product Number: 9-204-141 TN available To analyze this case, students need the case courseware (HBS 204705)

Global Industry Setting: investment management Case Time Frame: 2004

Chapter 16: Foreign Direct Investment and CrossBorder Acquisitions FDI in China HBS China Case Time Yasheng Huang 28p Frame Start: 2000 Product Case Time Frame Number: End: 2000 9-701-061 TN available

China is one of the most popular investment destinations in the world. Throughout much of the 1990s, China accounted for 50% of foreign direct investment (FDI) going into developing countries and between 1994 and 1997, China was the second largest recipient of FDI in the world, after the United States. The recent agreements between China on the one hand and the United States and the European Union on the other hand over China's accession into the World Trade Organization (WTO) may increase China's already impressive

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

FDI inflows significantly. This case examines the drivers of FDI flows into China and the lessons for other developing countries. Teaching Purpose: To teach students to think about FDI as a competitive process. Subjects: Business government relations; China; Foreign investment; Globalization; International trade; National competitiveness Opens in June 1997 with a team from the International Finance Corp. (IFC) recommending that the board approve a $120 million investment in a $1.4 billion aluminum smelter in Mozambique known as the Mozal project. Four factors make the investment controversial: it would be the IFC's largest investment in the world; total investment was almost the size of Mozambique's gross domestic project (GDP); Mozambique had only recently emerged from 20 years of civil war; and several key contractual issues were still undecided. Because commercial bankers have refused to finance the deal unless the IFC is involved, the sponsors have requested IFC participation. Whether the IFC's board will agree that it is the right time and the right place to make such a large investment remains to be seen. Teaching Purpose: Designed for people with an interest in capital investments in emerging markets. Presents an extreme example of political risk in a developing country and shows how project sponsors attempt to mitigate the risks through project selection, structuring, and insurance. Next, it highlights the contributions of multilateral development institutions in general, and the IFC in particular, in financing infrastructure projects. In particular, it analyzes IFC's involvement in appraising, structuring, monitoring, and financing infrastructure projects, and shows how these activities create value by resolving costly market imperfections including information, distress, agency, and transaction costs. Also explores the IFC's performance in each of its roles. Subjects: Africa; Aluminum; Capital investments; Developing countries; Emerging markets; Metals; Political risk; Project finance

Financing the Mozal Project

Benjamin C. Esty Fuaad A. Qureshi

HBS 20p Product Number: 9-200-005 TN available

Mozambique, Africa Industry Setting: aluminum/metals Gross Revenue: $500 million revenues Number of Employees: 900 Case Time Frame Start: 1997 Case Time Frame End: 1997

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Petrolera Zuata, Petrozuata C.A. *

Benjamin C. Esty Mathew Mateo Millett

HBS 22p Product Number: 9-299-012 TN available

Venezuela Industry Setting: petroleum Gross Revenue: $77 billion revenues Number of Employees: 150,000 Case Time Frame Start: 1996 Case Time Frame End: 1997

Note on U.S. Taxation of Foreign-Source Corporate Income

Henry B. Reiling

HBS 7p Product Number: 9-292-101 TN available

N/A

Background and Agreements on Foreign Direct Investment Louis T. Wells Jr.;

Courtenay Sprague

HBS 13p Product Number: 9-796-148

N/A

Petrozuata is a proposed $2.5 billion oil-field development project in Venezuela. The project sponsors, Conoco, Inc. and PDVSA (Venezuela's national oil company), are planning to meet with various development agencies and rating agencies regarding the proposed financial structure. The sponsors hope to raise a portion of the $1.5 billion debt in the capital markets, which will require an investment-grade rating. The key questions are whether the project will achieve an investmentgrade rating and, if not, how to finance the project. Teaching Purpose: Describes what turned out to be an extremely well-crafted financial transaction. Addresses questions like why use project finance, how to allocate project risk, and how to value project investments. Also addresses the ratings process and, in particular, the possibility that a deal can pierce the sovereign ceiling (to receive a higher rating than the country rating in which it is located). Finally, shows how the capital markets are becoming an important source of funds for development projects. Subjects: Capital markets; Developing countries; International finance; Natural resources; Petroleum; Project finance; Risk assessment; South America; Valuation Identifies several of the problems and policy choices associated with taxing foreign-source income. Examples are given of the practical aftertax effects of the major alternatives. Foreign tax credit and "tax haven" based business activities receive special attention. Provides an understanding of the basic problems and principles associated with U.S. taxation of foreign-source corporate income. Subjects: Accounting procedures; Foreign investment; Tax accounting; Taxation A brief history of foreign direct investment (FDI) is put forth, with emphasis on conflicts, accompanied by developments in the legal framework governing FDI, as well as international agreements and nonbinding principles formulated to resolve disputes brought in by FDI. Propositions provide a context from which core issues may be discussed by the students. Teaching Purpose: To explore the reasons for international conflict over

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foreign direct investment and the opportunities for international agreements to manage these conflicts. Subjects: Foreign investment; International business; International finance; Negotiations Between 1985 and 1990, the global economy witnessed an unprecedented surge in flows of foreign direct investment (FDI). This sudden increase called back into prominence the range of questions that have long surrounded FDI. What causes firms to expand or contract their purchase of foreign assets? How do patterns of investment affect trade and development? What is the impact of FDI on host countries? This note explores these questions in some detail and includes data summarizing recent trends in FDI flows. Teaching Purpose: To present background information on the causes and effects of FDI. Subjects: Developing countries; Foreign investment; International trade Describes the emergence and subsequent decline of the political risk analysis industry. Discusses what political risk means for multinational firms and various ways in which firms have tried to analyze and grapple with these risks. Teaching Purpose: Serves as background for discussions on foreign direct investment, risk management, and the politics of international business. Subjects: Business conditions; Business government relations; Forecasting; Foreign investment; International business; Political risk; Politics Shanghai General Motors (SGM) was founded in 1997 as a 50/50 joint venture between General Motors and Shanghai Automotive Industry Corporation (SAIC), a local firm owned by the Shanghai Municipal Government. The partners contributed equal amounts of equity and a consortium of banks provided debt financing for the new enterprise. SGM built an automotive plant and began selling cars in 1999. Its operations were profitable from the start and by 2000 SGM had gained a 5% share of the Chinese automobile market. SGMs initial products were a luxury sedan and a minivan, sold under the Buick model name. These automobiles had proved popular with business and government customers and SGM planned to introduce a smaller, more

Note on Foreign Direct Investment Debora Spar ; Julia

Kou

HBS 13p Product Number: 9-795-031

N/A

Note on Political Risk Analysis Debora Spar ; Heidi Deringer ;

Jennifer Wang

HBS 12p Product Number: 9-798-022

N/A

The Refinancing of Shanghai General Motors (A) Mihir A. Desai; Mark F. Veblen

HBS 21p Product Number: 9-204-031 TN available

China Industry Setting: auto Case Time Frame: 2000

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

affordable family car in 2001. SGMs original capitalization occurred after the Asian financial crisis making it challenging to convince banks to invest in a new Chinese enterprise. By late 2000, however, SGM had a track record of profitable operations and SGM faced new strategic issues with Chinas forthcoming entry into the WTO. The CFO of SGM, Mark Newman, sought to refinance SGMs long-term debt and its revolving credit facility. In particular, Newman wanted to increase the proportion of RMB-denominated debt and to secure more favorable terms from SGMs lenders. In developing a proposal for refinancing SGM, Newman had to consider several issues: how Chinas entry into the WTO in 2001 would affect SGMs operations and the partnership that governed SGM; how to construct a new financial strategy with the appropriate priorities; and how subsidiary financings should balance subsidiary and parental concerns. Subjects: Joint ventures; Foreign direct investment; Currency composition of debt

Chapter 17: International Capital Structure and the Cost of Capital The Loewen HBS British Columbia, Group, Inc. 24p Canada Industry Stuart C. Gilson ; Product Setting: funeral Jose Camacho Number: homes Gross 9-201-062 Revenue: $1.1 billion revenues Number of Employees: 16,000 Case Time Frame Start: 1998 Case Time Frame End: 1999

A publicly-traded funeral home and cemetery consolidator faces imminent financial distress. The company has aggressively grown through use of debt. Restructuring the debt is potentially very costly to creditors, shareholders, suppliers, and other corporate stakeholders. Cross-border and accounting issues potentially complicate the restructuring. Teaching Purpose: To illustrate the costs of debt, financial distress, basic restructuring options, and determinants of capital structure. Subjects: Bankruptcy; Canada; Debt management; Financial analysis; Financial management; Financial strategy; Management of crises; Reorganization; Services

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

New World Development Co. Ltd.: Diversify or Focus? Su Han Chan ; Ko Wang ; Mary Ho U. of Hong Kong 16p Product Number: HKU166 Hong Kong Case Time Frame Start: 1997 Case Time Frame End: 2001 New World Development Co. Ltd. (NWD) was a leading conglomerate based in Hong Kong. After more than 20 years of operations, the group had expanded its core businesses to include property, infrastructure, services, and telecommunications. From late 1997 to June 2001, the stock price performance of the company had been abysmal. Its efforts at asset disposals to reduce gearing, while making additional investments in new businesses, confused investors. Security analysts also blamed the company for not keeping its promise to focus on its core business of property. Teaching Purpose: Requires students to conduct an objective assessment of NWD on both a divisional and a consolidated basis. It provides sufficient information for them to compute the divisional cost of capital using the capital asset pricing model (CAPM) and to conduct a simple Economic Value Added (EVA) analysis. Subjects: Asia; Capital costs; Conglomerates; Diversified companies; EVA; Financial analysis This small but rapidly growing Danish biochemical company must choose among several financing opportunities that include a convertible Eurobond, a rights offering in Denmark and an issue of new common shares in the United States. The case involves a broad range of issues concerning the ability of a multinational company to lower its cost of capital by tapping different capital markets worldwide. Subjects: Capital costs; Capital markets; Financing; International finance AES is a global power firm with operations in 30 countries and on five continents. The company operates in four business segments: utilities, contract generation, competitive supply, and growth distribution. After going public in 1991, AES grew rapidly with much of its growth coming from its international expansion. The global economic downturn that began in late 2000 had a severe inpact on AES. The company was hit by currency devaluations in South America, lower energy prices, and changes in the regulatory regimes for energy in some countries. AESs deteriorating performance led to a steep decline in its stock price and the companys market capitalization fell almost 95% over a two year

Novo Industri A/S--1981

W. Carl Kester

HBS 12p Product Number: 9286-084 TN available

Denmark, United States Industry Setting: biochemical Company Size: midsize Gross Revenue: $300 million sales Case Time Frame Start: 1981 Case Time Frame End: 1981 Global Industry Setting: energy Case Time Frame: 2003

Globalizing the Cost of Capital and Capital Budgeting at AES Mihir Desai, Doug Schillinger

HBS 23p Product Number: 9-204-109 TN available

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

period. The financial crisis led AES to create a new planning group, charged with valuing the companys assets and developing a methodology for calculating the cost of capital for AESs diverse businesses around the world. In the past, AES had used a 12% cost of capital to evaluate all projects worldwide. Rob Venerus, the director of the new planning group, aims to improve on this approach by developing a methodology that incorporates country risk and other risks specific to a project into the cost of capital for each project. Venerus has to decide if this approach, designed to provide a more accurate financial assessment of the companys diverse international businesses, would actually improve AESs financial decision making. The case presents a methodology for determining a projects weighted average cost of capital (WACC) thath is based on a domestic CAPM familier to most students, and then provides adjustments for country and project-specific risks. Students can use the methodology to calculate the cost of capital for several of AESs projects in different parts of the world. In the process, students are forced to consider the economic justification for the widely varying discount rates that the methodology generates for various AES projects around the world, the use of sovereign spreads to measure country risk, and the appropriate way to do valuation in emerging markets. Subjects: Capital budgeting; Adjusted cost of capital; Sovereign spreads; Idiosyncratic risk factors Chapter 18: International Capital Budgeting Note on Adjusted HBS N/A Present Value* 7p Timothy A. Product Luehrman Number: 9-293-092 TN available Describes the "adjusted present value" (APV) approach to discounted cash flow analysis. Much of the note is devoted to a critical comparison of APV and an approach based on the weighted average cost of capital (WACC). Argues that APV is usually, if not always, simpler, more accurate, and/or more informative than using the WACC. Designed to be distributed in conjunction with a case on valuation and capital budgeting. Assumes students are familiar with the WACC but not with

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Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

APV. Subjects: Capital budgeting; Capital costs; Present value; Valuation Provides a review of valuation techniques used to assess cross-border investments. Discusses the discounting of free cash flows with a weighted average cost of capital and the use of adjusted present value. Special concerns such as foreignexchange risk, country risks, and international diversification are also discussed. Unlike Note on Cross-Border Valuation, this note contains no discussion of valuing real options. A rewritten version of an earlier note. Subjects: Capital costs; Foreign exchange; Foreign exchange rates; International finance; Present value; Valuation Management must choose between two mutually exclusive bids to build two drilling rigs. Both bids involve attractive export credit financing denominated in foreign currencies. Subjects: Bids; Currency; Foreign exchange; International finance; Petroleum

Cross-Border Valuation*
Kenneth A. Froot W. Carl Kester

HBS 21p Product Number: 9-295-100

N/A

Ocean Drilling, Inc.*

Thomas R. Piper

HBS 15p Product Number: 9-282-050 TN available

MSDI-Alcala de Henares, Spain*

Timothy A. Luehrman ; James J. Student

HBS 6p Product Number: 9-289-029

United States Industry Setting: oil drilling Gross Revenue: $300 million sales Case Time Frame Start: 1981 Case Time Frame End: 1981 Spain Industry Setting: pharmaceuticals Company Size: Fortune 500 Case Time Frame Start: 1987 Case Time Frame End: 1987

Merck & Co., Inc. is evaluating a proposed costsaving investment by its Spanish subsidiary. The case introduces techniques of discounted cash flow valuation analysis in a multicurrency setting. Can be used to teach basic international parity conditions as they relate to the value of operating cash flows. Subjects: Europe; Foreign exchange rates; International finance; Pharmaceuticals; Project evaluation; Securities analysis; Valuation

Valuaing a Cross-Border LBO: Bidding on the Yell Group Mihir A. Desai; Paolo Notarnicola; Mark F. Veblen

HBS 17p Product Number: 9-204-033 TN available

U.K., U.S. Industry Setting: publishing Case Time Frame: 2001

Two of the largest firms in global private equity, Apax Partners and Hicks, Muse, Tate & Furst have joined forces to bid for Yell, a division of British Telecom (BT). Yell published business directories in two countries: BT Yellow Pages in the United Kingdom and Yellow Books USA in the United States. BT anticipated raising as much as 2 billion from the sale of the Yell assets, and this large transaction would be a significant event in

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

the still-developing European private equity market. The private equity consortium must value Yell and decide how much to bid for the business. The key issue in the case is how to value an enterprise with businesses in different countries with cash flows in different currencies. The proposed LBO of Yell also raises the question of the appropriate discounted cash flow method to use for a business with a highly leveraged and changing capital structure, and poses the problem of how to build financial models for two very different businesses. Yells U.K. and U.S. businesses have different strategic characteristics and different growth rates. The private equity firms have to assess managements projections, decide what adjustments are necessary, and build cash flow models for each business, as in purely domestic valuations. The analysis then has to be extended, as this is a cross-border deal, and the separate cash flows foro the two businesses have to be combined to value the total enterprise. This setting raises the problem of how to incorporate currency differences into the valuation. The valuation of Yell presents some of the fundamental issues that arise in all cross-border transactions when businesses operating in different currencies have to be valued in combination. Subjects: Cross-border transactions; CCF; APV; WACC Chapter 19: Multinational Cash Management N/A

Chapter 20: International Trade Finance The U.S. Export- HBS United States/China Import Bank and 10p Industry Setting: the Three Gorges Product banking Case Time Dam (A) Number: Frame Start: 1996 George C. Lodge 9-900-017 Case Time Frame Cate Reavis B case End: 1996 available TN available Barter Industry Babson N/A Note 9p Julian Lange ; Product

Describes the dilemma Martin Kamarck faced as president of the Export-Import Bank in whether to provide U.S. companies financing for China's Three Gorges Dam project. Subjects: Banking; Business government relations; China; Economic infrastructure; Government agencies; Government policy; Politics; Project finance Provides an overview of the corporate barter industry, including industry trends, and traces the technical steps in barter transactions. The

Case Map for

Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009)

Benoit Leleux ; Sam Perkins

Number: BAB025

motivation for various barter transactions is explored, including purchase of underperforming assets, remarketing inventory, trade credit retirement, and purchasing media and other services (including bill-payer and cross-purchasing arrangements). The accounting treatment of barter transactions is illustrated. Subjects: Advertising media; Barter; Cash flow; Entrepreneurial finance; Entrepreneurial management; Entrepreneurs; Financing; Information technology Identifies several of the problems and policy choices associated with taxing foreign-source income. Examples are given of the practical aftertax effects of the major alternatives. Foreign tax credit and "tax haven" based business activities receive special attention. Provides an understanding of the basic problems and principles associated with U.S. taxation of foreign-source corporate income. Subjects: Accounting procedures; Foreign investment; Tax accounting; Taxation In February 2002, Stanley Works, a leading U.S. toolmaker, announced that it was moving its legal domicile to Bermuda. The company cited its increasingly global business and its need to remain competitive as reasons for the move. In particular, Stanley claimed that its effective worldwide tax rate would drop as much as 9% if it relocated to Bermuda. The stock market reacted favorably to Stanleys announcement and its stock price rose significantly. A few months later, when Stanley apparently backed down from its plan, its stock price plunged. One of Stanleys U.S. competitors, American Handyworks, Inc. attempts to understand how the proposed change in Stanleys legal domicile could have such an impact on its market capitalization. American Handyworks tax planner has to quantify the gains Stanley would realize if it relocated overseas, and determine if his own firm should pursue such a strategy. Subjects: Worldwide taxation system; Corporate tax avoidance; Tax management

Chapter 21: International Tax Environment Note on U.S. HBS N/A Taxation of 7p Foreign-Source Product Corporate Number: Income 9-292-101 Henry B. Reiling TN available

Corporate Inversions: Stanley Works and the Lure of Tax Havens Mihir A. Desai; James R. Hines, Jr.; Mark F. Veblen

HBS 16p Product Number: 9-203-008 TN available

Global Industry Setting: toolmaking Case Time Frame: 2002