INTERNATIONAL FINANCIAL MANAGEMENT

Module 3 – Case: INTERNATIONAL FINANCIAL MANAGEMENT

Assignment Overview
Before starting the case, make sure to go through the required reading
material carefully. Review the concepts of exchange rates, currency
hedging, and other methods of dealing with exchange rate risk. The topic
of this module is difficult, so make sure you go carefully through all of the
required tutorials and book chapters.
Case Assignment
When you have finished reviewing the background materials, apply your
knowledge of the material to answer the following questions in a 4- to
5-page paper:
1. Suppose you are a consultant who travels the world to make predictions
about exchange rates for your clients. You have been hired to go to a
foreign country to make a prediction about whether the value of the
currency in this country will go up or down. When you arrive in this
country, the first thing you notice is that everything is very expensive
compared to what you are used to in the United States. Some items
such as soft drinks or bottled water cost twice as much as what you pay
at home. You also find that the economy in this country is starting to
shrink a bit, and several foreign-owned businesses are moving out of
the country. Would you tell your client that you expect the value of the
currency in this country will increase or decrease? Explain your
reasoning, and make references to Agarwal (2009) in your answer.
2. Suppose a small manufacturing business purchases 90% of its raw
materials and supplies from Japan. It is a very specialized business and
has no place other than Japan to purchase its materials. Thus, if the
value of the Japanese currency goes up compared to the dollar, profit
margins will go down since it will cost the company more to purchase its
supplies. What methods do you think would be best to manage this risk
under these circumstances? Refer to at least one of the required
readings from the background materials in your answer.Privacy Policy | Contact
3. Consider a large multinational consumer product company with
operations in all major advanced and emerging economies. Now
suppose the value of the Indian and Brazilian currencies drops
dramatically and the value of the Mexican peso increases dramatically.
What kind of strategic changes in marketing and/or location of
production facilities do you think this company should take given these
new exchange rates? Explain your reasoning, and make references to
Avadhani (2010) and Shackman (2015) in your answer.
Assignment Expectations
• Answer the assignment questions directly.
• Stay focused on the precise assignment questions. Don’t go off on
tangents or devote a lot of space to summarizing general background
materials.
• Make sure to use reliable and credible sources as your references.
Articles published in established newspapers or business
journals/magazines are preferred. If you find articles on the internet,
make sure they are from credible sources.
• Reference your sources of information with both a bibliography and intext citations. See the Student Guide to Writing a High-Quality
Academic Paper, including pages 11-14 on in-text citations. Another
resource is the “Writing Style Guide,” which is found under “My
Resources” in the TLC portal.

Module 3 – Background
INTERNATIONAL FINANCIAL MANAGEMENT
Required Reading
A good place to start is by viewing the PowerPoint presentation and interactive tutorial linked
below. These presentations will give you a good general overview and introduction to this topic:
International business finance. (2014). Pearson Learning Solutions.
New York, NY.
International trade and finance. (2014). Pearson Learning Solutions.
New York, NY. [Pay special attention to the last half of this tutorial on
exchange rates. The first half is not as important.]
Shackman, J. (2015). The economic and financial environment of
international business. Trident University International, Cypress, CA.
After going through the tutorials, get into more specifics and details with the following required
readings:
Goyal, A. (2013, September 19). Dealing with currency volatility. Businessline. [ProQuest]
Agarwal, O. (2009). Chapter 5: Foreign exchange risks. In International
Financial Management. Mumbai, India: Himalaya Publishing House. [Ebrary].
The following book chapter is especially important for the discussion about managing marketing
and production operations in response to changes in exchange rates at the end of the chapter:
Avadhani, V. (2010). Chapter 7: Management of international transaction exposure.
In International Financial Management. Mumbai, India: Himalaya Publishing House. [Ebrary]