Financial Management, 12th Edition by Pearson

CHAPTER 34

International Financial Management

LEARNING OBJECTIVES

• Describe how the foreign exchange market operates.
• Explain the relationship between interest rates, inflation rates and exchange rates.
• Discuss the techniques that can be used to hedge the ­foreign exchange risk.
• Illustrate how international capital budgeting decisions are made.
• Explain the methods of financing international operations.

INTRODUCTION

The basic objectives of financial management in international (or multinational) firms remain the same as in domestic firms.¹ Like a domestic firm, a multinational firm’s goal is to maximize the shareholder value on a global basis. It acquires assets that have present value more than their initial investment and it creates claims ...