FIN 621 : International finance notes.docx

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Chapter 1 globalization and the multinational firm. Dimensions setting international finance apart from domestic finance: foreign exchange risk and political risk. Foreign exchange risk: change in sales and profits due unexpected changes in the exchange rates. Political risk: from unexpected changes in changes in tax rules to outright expropriation of assets held by foreigners: differences in regulations, tax law and government policies. Market imperfections : various frictions and impediments that prevent markets from functioning effectively. *mnc multinational corporations: greater set of business opportunities for production and investment. Expanded opportunity set ability of firms engaging in business beyond their own national borders, when they become transnational or multinational. Benefiting by investing internationally rather than domestically. Goals for international financial management: understanding and managing foreign exchange and political risks and coping with market imperfections have become important parts of the financial manager"s job. Since shareholder wealth maximization is a longterm goal.

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