(1) Interview the international financial manager of a large company in your area and identify the main financial links of the company. Outline the main sources and uses of funds (where the
money comes from and where it goes) and the currency in which each income and/ or expenditure stream is denominated. Use Figure 12.1 as a guide.
(2) Write a one-page essay explaining the main functions of an international finance department.
(3) Explain the following concepts:
Exposure to macroeconomic risks
Macroeconomic structure
Policy regime
Commercial risk Firm - and industry -specific risk
Country risk
Currency risk
Financial risk
(4) Leona DiPascali is president of LDP, Inc., a U.S. firm that operates a chain of small specialty stores selling ethnic coffees, candies, ice creams, and other gourmet foods. She recently
ordered five Subitomacina machines from an Italian firm. The machines are designed to make and dispense Italian-style ice cream, which is a huge success in Europe. Subitomacina is produced by
Subitolabori of Milan, a company owned by Ms. DiPascali's distant cousin. The Italian cousin is willing to lag LDP's accounts receivable, because he wants to be nice to his cousin and get a
foot in the U.S. market. Ms. DiPascali not only wants to make sure that she does not lose any money from the fluctuations of the Italian lira against the dollar, but also wishes to make some
exchange profits on the deal. What are LDP's options? Explain how Ms. DiPascali and LDP, Inc. can avoid translation losses.
(5) An international manager who is an alumnus of your college returns to campus to deliver a speech on "Joint Ventures and Other Type of Investment with Debtor Countries: The Only Solution to
the International Debt Problem." The message is clear: there is no way the developing countries in Latin America can pay back the money they owe. At the same time, U.S. banks cannot continue
carrying these nonperforming loans on their books without jeopardizing their financial positions. The visiting lecturer recommends debt-equity swaps as a viable solution. Pick a company in your
area that might be willing to consider the idea of investing in a debtor country by buying bank paper in the United States and investing in real assets in the debtor country. Create a business
plan for that company. If possible, get advice from a local bank official. Before exploring the debt-equity swap funding strategy, briefly examine the other funding options shown in Figure 12.11. Would any of these options be preferable to a debt-equity swap? If so, which ones, and
why?
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