Solution Manual for International Financial Management, 10th Edition, 2024 By Cheol Eun, Bruce G. Resnick, Verified Chapters 1 - 21

SOLUTION MANUAL FOR op op




International Financial Management, 10th Edition EUN
op op op op op




op Chapter 1-21 op




CHAPTER 1 op



GLOBALIZATION opAND opTHE opMULTINATIONAL opFIRM
ANSWERS op& opSOLUTIONS opTO opEND-OF-CHAPTER opQUESTIONS opAND opPROBLEMS

QUESTIONS

1. Why opis opit opimportant opto opstudy opinternational opfinancial opmanagement?

Answer: op We opare opnow opliving opin opa opworld opwhere opall opthe opmajor opeconomic opfunctions, opsuch
op as opconsumption, opproduction, opinvestment, opand opfinancing, opare ophighly opglobalized. o p It opis
op thus opessential o p for opfinancial opmanagers opto opfully opunderstand opvital opinternational opdimensions
op of opfinancial opmanagement. op This opglobal opshift opis opin opmarked opcontrast opto opa opsituation opthat
op existed opwhen opthe opauthors opof opthis opbook opwere oplearning opfinance opa opfew opdecades opago. o p At
op that time,
op op most professors
op customarily
op op (and op safely, to
op some
op extent)
op ignored
op


op international opaspects opof opfinance. o p This opmode opof opoperation ophas opbecome opuntenable
op since opthen.

2. How opis opinternational opfinancial opmanagement opdifferent opfrom opdomestic opfinancial opmanagement?

Answer: op There opare opthree opmajor opdimensions opthat opset opapart opinternational opfinance opfrom
op domestic opfinance. opThey opare:
1. foreign opexchange opand oppolitical oprisks,
2. market opimperfections, opand
3. expanded opopportunity opset.

3. Discuss opthe opmajor optrends opthat ophave opprevailed opin opinternational opbusiness opduring opthe
last optwo opdecades.
op




Answer: op The op2000s opbrought opa oprapid opintegration opof opinternational opcapital opand opfinancial
op markets. opImpetus opfor opglobalized opfinancial opmarkets opinitially opcame opfrom opthe opgovernments
op of opmajor opcountries opthat ophad opbegun opto opderegulate optheir opforeign opexchange opand opcapital
op markets. o p The opeconomic
©MCGRAW opHILL opLLC. opALL opRIGHTS opRESERVED. opNO opREPRODUCTION opOR opDISTRIBUTION opWITHOUT opTHE opPRIOR opWRITTEN
opCONSENT opOF opMCGRAW opHILL opLLC

,integration opand opglobalization opthat opbegan opin opthe opeighties opand opnineties opare oppicking opup
speed opin opthe op2000s. opTrade opliberalization opand opeconomic opintegration opcontinued opto
op


op proceed opat opboth opthe opregional opand opglobal oplevels. opDespite opsovereign opdebt opcrisis opin
op Europe, opmore opEU opmember opcountries ophave opadopted opthe opcommon opcurrency, opthe opeuro,
op that opeffectively opbecame opthe opsecond opglobal opcurrency opafter opthe opU.S. opdollar. opIn opthe oplast
op few opyears, ophowever, opeconomic opnationalism ophas opbeen opgaining opsome oppopularity, opas
exemplified opby opthe opBrexit opdecision opof opthe opUnited opKingdom opand opthe opso-called
op


―America opFirst‖ oppolicies opof opthe opTrump opAdministration. opTo opthe opextent opthat opeconomic
nationalism opis opa oppopulist opresponse opto opthe opglobal opfinancial opcrisis opand opGreat opRecession,
op


op it opmay opsubside opas opthe opworld opeconomy opcontinues opto oprecover.

4. How opis opa opcountry‘s opeconomic opwell-being openhanced opthrough opfree opinternational optrade
in opgoods opand opservices?
op




Answer: op According opto opDavid opRicardo, opwith opfree opinternational optrade, opit opis opmutually
op beneficial opfor optwo opcountries opto opeach opspecialize opin opthe opproduction opof opthe opgoods opthat opit
op can opproduce oprelatively opmost opefficiently opand opthen optrade opthose opgoods. op By opdoing opso,
op the optwo opcountries opcan opincrease optheir opcombined opproduction, opwhich opallows opboth
op countries opto opconsume opmore opof opboth opgoods. opThis opargument opremains opvalid opeven opif opa
op country opcan opproduce opboth opgoods opmore opefficiently opin opabsolute opterms opthan opthe opother
country. o p International optrade opis opnot opa op‗zero-sum‘ opgame opin opwhich opone opcountry opbenefits
op


op at opthe opexpense opof opanother opcountry. opRather, opinternational optrade opcould opbe opan
op ‗increasing- opsum‘ opgame opfrom opwhich opall opplayers opbecome opwinners.

5. What opconsiderations opmight oplimit opthe opextent opto opwhich opthe optheory opof opcomparative
op advantage opis oprealistic?

Answer: op The optheory opof opcomparative opadvantage opwas oporiginally opadvanced opby opthe
op nineteenth opcentury opeconomist opDavid opRicardo opas opan opexplanation opfor opwhy opnations optrade
op with opone opanother. opThe optheory opclaims opthat opeconomic opwell-being opis openhanced opif opeach
op country opproduces opwhat opit ophas opa opcomparative opadvantage opin opproducing oprelative opto opother
op countries, opand opthen optrade opproducts.
Underlying opthe optheory opare opthe opassumptions opof opfree optrade opbetween opnations opand opthat opthe
factors opof opproduction op(labor, optechnological opknow-how, opand opcapital) opare oprelatively
op


op immobile. op To opthe opextent opthat opthese opassumptions opdo opnot ophold, opthe optheory opof
op comparative opadvantage opmay opnot oprealistically opdescribe opinternational optrade. op In opaddition,
op free optrade opproduces opwinners opand oplosers opand opif opthe oplosers opare opnot opcompensated, opfree
op trade opmay opfaces oppolitical opopposition opfrom opthem.
©MCGRAW opHILL opLLC. opALL opRIGHTS opRESERVED. opNO opREPRODUCTION opOR opDISTRIBUTION opWITHOUT opTHE opPRIOR opWRITTEN
opCONSENT opOF opMCGRAW opHILL opLLC

,6. What opare opmultinational opcorporations op(MNCs) opand opwhat opeconomic oproles opdo opthey opplay?




©MCGRAW opHILL opLLC. opALL opRIGHTS opRESERVED. opNO opREPRODUCTION opOR opDISTRIBUTION opWITHOUT opTHE opPRIOR opWRITTEN
opCONSENT opOF opMCGRAW opHILL opLLC

, Answer: op A opmultinational opcorporation op(MNC) opcan opbe opdefined opas opa opbusiness opfirm
op incorporated opin opone opcountry opthat ophas opproduction opand opsales opoperations opin opmany opother
op countries. opIndeed, opsome opMNCs ophave opoperations opin opa opfew opdozens opof opdifferent
op countries. o p MNCs opobtain opfinancing opfrom opmajor opmoney opcenters oparound opthe opworld opin
op many opdifferent opcurrencies opto opfinance optheir opoperations. opGlobal opoperations opforce opthe
op treasurer‘s opoffice opto opestablish opinternational opbanking oprelationships, opto opplace opshort-term
op funds opin opseveral opcurrency opdenominations, opand opto opeffectively opmanage opforeign opexchange
op risk. op By opcircumventing opand opalso optaking opadvantage opof opvarious opmarket opimperfections,
op such opas opbarriers opto optrade opand opbarriers opto opflow opof oppeople opand opcapital opacross
op countries, opMNCs opcontribute opto opgreater opintegration opof opthe opworld opeconomy opand oping opmore
perfect opfunctioning opof opglobal opmarkets.
op




7. Ross opPerot, opa opformer opPresidential opcandidate opof opthe opReform opParty, opwhich opwas opa
third oppolitical opparty opin opthe opUnited opStates, ophad opstrongly opobjected opto opthe opcreation opof opthe
op


op North opAmerican opTrade opAgreement op(NAFTA), opwhich opnonetheless opwas opinaugurated opin
op 1994. opPerot opfeared opthe oploss opof opAmerican opjobs opto opMexico opwhere opit opis opmuch opcheaper
op to ophire opworkers. opWhat opare opthe opmerits opand opdemerits opof opPerot‘s opposition opon opNAFTA?
op Considering opthe oprecent opeconomic opdevelopments opin opNorth opAmerica, ophow opwould opyou
op assess opPerot‘s opposition opon opNAFTA?

Answer: opSince opthe opinception opof opNAFTA, opmany opAmerican opcompanies opindeed ophave
op invested opheavily opin opMexico, opsometimes oprelocating opproduction opfrom opthe opUnited opStates opto
Mexico. opAlthough opthis opmight ophave optemporarily opcaused opunemployment opof opsome
op


op American opworkers, opthey opwere opeventually oprehired opby opother opindustries opoften opfor ophigher
op wages. opAt opthe opsame optime, opMexico ophas opbeen opexperiencing opa opmajor opeconomic opboom.
op It opseems opclear opthat opboth opMexico opand opthe opU.S. ophave opbenefited opfrom opNAFTA. opPerot‘s
op concern opappears opto ophave opbeen opill opfounded.

8. In op1995, opa opworking opgroup opof opFrench opchief opexecutive opofficers opwas opset opup opby opthe
op Confederation opof opFrench opIndustry op(CNPF) opand opthe opFrench opAssociation opof opPrivate
op Companies op(AFEP) opto opstudy opthe opFrench opcorporate opgovernance opstructure. opThe opgroup
op reported opthe opfollowing, opamong opother opthings: op ―The opboard opof opdirectors opshould opnot
op simply opaim opat opmaximizing opshare opvalues opas opin opthe opU.K. opand opthe opU.S. opRather, opits opgoal
op should opbe opto opserve opthe opcompany, opwhose opinterests opshould opbe opclearly opdistinguished
op from opthose opof opits opshareholders, opemployees, opcreditors, opsuppliers opand opclients opbut opstill
op equated opwith optheir opgeneral opcommon opinterest, opwhich opis opto opsafeguard opthe opprosperity opand
op continuity opof opthe opcompany‖. opEvaluate opthe opabove oprecommendation opof opthe opworking opgroup.

©MCGRAW opHILL opLLC. opALL opRIGHTS opRESERVED. opNO opREPRODUCTION opOR opDISTRIBUTION opWITHOUT opTHE opPRIOR opWRITTEN
opCONSENT opOF opMCGRAW opHILL opLLC