Instructor Manual: Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1: Multinational
Financial Management: An Overview
Instructor Manual
Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1:
Multinational Financial Management: An Overview
TABLE OF CONTENTS
Chapter Objectives .............................................................................................................................. 2
Chapter Outline ................................................................................................................................... 2
Managing the MNC ...................................................................................................................................... 2
Why Firms Pursue International Business ............................................................................................ 2
Methods to Conduct International Business ........................................................................................ 2
Valuation Model for an MNC .................................................................................................................... 3
Organization of the Text............................................................................................................................ 3
Chapter Theme ....................................................................................................................................4
Topics to Stimulate Class Discussion After Reading the Chapter ..................................................4
Questions ...................................................................................................................................................... 4
Point/Counterpoint Discussion ................................................................................................................ 4
Small Business Dilemma ........................................................................................................................... 5
Answers to Questions and Applications............................................................................................ 6
Advanced Questions ..................................................................................................................................10
Critical Thinking..........................................................................................................................................18
Solution to Continuing Case Problem: Blades, Inc. ........................................................................ 18
© 2026
, Instructor Manual: Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1: Multinational
Financial Management: An Overview
CHAPTER OBJECTIVES
After reading this chapter, you will be able to:
LO1 Identify the management goal and organizational structure of the MNC.
LO2 Describe the key theories about why MNCs engage in international business.
LO3 Explain the common methods used to conduct international business.
LO4 Provide a model for valuing the MNC.
CHAPTER OUTLINE
MANAGING THE MNC
How Business Disciplines Are Used to Manage the MNC
Agency Problems
Management Structure of an MNC
WHY FIRMS PURSUE INTERNATIONAL BUSINESS
Theory of Comparative Advantage
Imperfect Markets Theory
Product Cycle Theory
METHODS TO CONDUCT INTERNATIONAL BUSINESS
International Trade
Licensing
Franchising
Joint Ventures
Acquisitions of Existing Operations
Establishing New Foreign Subsidiaries
Summary of Methods
© 2026
, Instructor Manual: Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1: Multinational
Financial Management: An Overview
VALUATION MODEL FOR AN MNC
Domestic Valuation Model
Multinational Valuation Model
Uncertainty Surrounding an MNC’s Cash Flows
How Uncertainty Affects the MNC’s Cost of Capital
ORGANIZATION OF THE TEXT
[return to top]
© 2026
, Instructor Manual: Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1: Multinational
Financial Management: An Overview
CHAPTER THEME
This chapter introduces the multinational corporation (MNC) as having similar goals to the
purely domestic corporation but a wider variety of opportunities. With additional opportunities
come potential increased returns and other forms of risk to consider. The potential benefits
and risks are introduced.
TOPICS TO STIMULATE CLASS DISCUSSION AFTER READING
THE CHAPTER
QUESTIONS
1. What is the appropriate definition of an MNC?
2. Why does an MNC expand internationally?
3. What are the risks of an MNC that expands internationally?
4. Why must purely domestic firms be concerned about the international environment?
POINT/COUNTERPOINT DISCUSSION
Should an MNC Reduce Its Ethical Standards to Compete Internationally?
POINT: Yes. When a U.S.-based MNC competes in some countries, it may encounter some
business norms there that are not allowed in the United States. For example, when competing
for a government contract, firms might provide payoffs to the government officials who will
make the decision. Yet, in the United States, a firm will sometimes take a client on an
expensive golf outing or provide skybox tickets to events. This is no different than a payoff. If
the payoffs are bigger in some foreign countries, the MNC can compete only by matching the
payoffs provided by its competitors.
COUNTER-POINT: No. A U.S.-based MNC should maintain a standard code of ethics that applies
to any country, even if it is at a disadvantage in a foreign country that allows activities that
might be viewed as unethical. In this way, the MNC establishes more credibility worldwide.
WHO IS CORRECT? Use the internet to learn more about this issue. Which argument do you
support? Offer your own opinion on this issue.
ANSWER: The issue is frequently discussed. It is easy to suggest that the MNC should maintain
a standard code of ethics, but, in reality, that means that it will not be able to compete in some
cases. For example, even if it submits the lowest bid on a specific foreign government project, it
will not receive the bid without a payoff to the foreign government officials. The issue is
especially a concern for large projects that may generate substantial cash flows for the firm
that is chosen to do the project. Ideally, the MNC can clearly demonstrate to whoever oversees
the decision process that it deserves to be selected. If there is just one decision-maker with no
oversight, an MNC cannot ensure that the decision will be ethical. But if the decision-maker
must be accountable to a department who oversees the decision, the MNC may be able to
prompt the department to ensure that the process is ethical.
© 2026
Financial Management: An Overview
Instructor Manual
Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1:
Multinational Financial Management: An Overview
TABLE OF CONTENTS
Chapter Objectives .............................................................................................................................. 2
Chapter Outline ................................................................................................................................... 2
Managing the MNC ...................................................................................................................................... 2
Why Firms Pursue International Business ............................................................................................ 2
Methods to Conduct International Business ........................................................................................ 2
Valuation Model for an MNC .................................................................................................................... 3
Organization of the Text............................................................................................................................ 3
Chapter Theme ....................................................................................................................................4
Topics to Stimulate Class Discussion After Reading the Chapter ..................................................4
Questions ...................................................................................................................................................... 4
Point/Counterpoint Discussion ................................................................................................................ 4
Small Business Dilemma ........................................................................................................................... 5
Answers to Questions and Applications............................................................................................ 6
Advanced Questions ..................................................................................................................................10
Critical Thinking..........................................................................................................................................18
Solution to Continuing Case Problem: Blades, Inc. ........................................................................ 18
© 2026
, Instructor Manual: Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1: Multinational
Financial Management: An Overview
CHAPTER OBJECTIVES
After reading this chapter, you will be able to:
LO1 Identify the management goal and organizational structure of the MNC.
LO2 Describe the key theories about why MNCs engage in international business.
LO3 Explain the common methods used to conduct international business.
LO4 Provide a model for valuing the MNC.
CHAPTER OUTLINE
MANAGING THE MNC
How Business Disciplines Are Used to Manage the MNC
Agency Problems
Management Structure of an MNC
WHY FIRMS PURSUE INTERNATIONAL BUSINESS
Theory of Comparative Advantage
Imperfect Markets Theory
Product Cycle Theory
METHODS TO CONDUCT INTERNATIONAL BUSINESS
International Trade
Licensing
Franchising
Joint Ventures
Acquisitions of Existing Operations
Establishing New Foreign Subsidiaries
Summary of Methods
© 2026
, Instructor Manual: Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1: Multinational
Financial Management: An Overview
VALUATION MODEL FOR AN MNC
Domestic Valuation Model
Multinational Valuation Model
Uncertainty Surrounding an MNC’s Cash Flows
How Uncertainty Affects the MNC’s Cost of Capital
ORGANIZATION OF THE TEXT
[return to top]
© 2026
, Instructor Manual: Madura, Zipfel, International Financial Management, 9798214040684; Chapter 1: Multinational
Financial Management: An Overview
CHAPTER THEME
This chapter introduces the multinational corporation (MNC) as having similar goals to the
purely domestic corporation but a wider variety of opportunities. With additional opportunities
come potential increased returns and other forms of risk to consider. The potential benefits
and risks are introduced.
TOPICS TO STIMULATE CLASS DISCUSSION AFTER READING
THE CHAPTER
QUESTIONS
1. What is the appropriate definition of an MNC?
2. Why does an MNC expand internationally?
3. What are the risks of an MNC that expands internationally?
4. Why must purely domestic firms be concerned about the international environment?
POINT/COUNTERPOINT DISCUSSION
Should an MNC Reduce Its Ethical Standards to Compete Internationally?
POINT: Yes. When a U.S.-based MNC competes in some countries, it may encounter some
business norms there that are not allowed in the United States. For example, when competing
for a government contract, firms might provide payoffs to the government officials who will
make the decision. Yet, in the United States, a firm will sometimes take a client on an
expensive golf outing or provide skybox tickets to events. This is no different than a payoff. If
the payoffs are bigger in some foreign countries, the MNC can compete only by matching the
payoffs provided by its competitors.
COUNTER-POINT: No. A U.S.-based MNC should maintain a standard code of ethics that applies
to any country, even if it is at a disadvantage in a foreign country that allows activities that
might be viewed as unethical. In this way, the MNC establishes more credibility worldwide.
WHO IS CORRECT? Use the internet to learn more about this issue. Which argument do you
support? Offer your own opinion on this issue.
ANSWER: The issue is frequently discussed. It is easy to suggest that the MNC should maintain
a standard code of ethics, but, in reality, that means that it will not be able to compete in some
cases. For example, even if it submits the lowest bid on a specific foreign government project, it
will not receive the bid without a payoff to the foreign government officials. The issue is
especially a concern for large projects that may generate substantial cash flows for the firm
that is chosen to do the project. Ideally, the MNC can clearly demonstrate to whoever oversees
the decision process that it deserves to be selected. If there is just one decision-maker with no
oversight, an MNC cannot ensure that the decision will be ethical. But if the decision-maker
must be accountable to a department who oversees the decision, the MNC may be able to
prompt the department to ensure that the process is ethical.
© 2026
