UNIVERSITY OF NAIROBI
SCHOOL OF BUSINESS
DEPARTMENT OF FINANCE & ACCOUNTING
DFI 401: INTERNATIONAL FINANCE
COURSE OUTLINE
Course Facilitator - Dr. Duncan Elly
COURSE DESCRIPTION:
The course will expose students to the international financial environment, international capital
and money markets, and the financial operations of the multinational enterprises.
COURSE OBJECTIVES:
The course is intended to enable students understand the operations of the international financial
markets, and to facilitate examination of the policies and procedures of investment and financing
decision making processes within the multinational enterprises. The main topics to be covered
include the Management of Foreign Exchange; International Asset Management; International
Tax Management and the International Sourcing of Funds.
COURSE TEXT :
Madura Jeff: International Financial Management. (7th edition) (South Western Publishing Co.
2003y)
CONDUCT OF THE COURSE
Mainly lectures and class discussions. Students are advised to read the relevant lecture materials
before these are covered in class to enhance their class discussions. Quizzes may be
administered without prior notice. Students are advised to do as much practice as is possible in
order to enhance their appreciation of the concepts that will be learnt in this course.
COURSE CONTENT
Week 1
Overview of International Finance
Goal of the multinational corporations (MNC)
Conflicts against MNC goals – The agency problem in MNCs
Constraints interfering with MNC goals
Theories of international business
International business methods
The globalization craze
The place of financial management in the MNC
Week 2 –3
The International Financial Markets
The international flow of funds and factors affecting them
The international financial markets’ roles
The foreign exchange market; history, role, operations, quotations, forward contracts,
currency futures and options.
The eurocurrency market
The international stock markets
Week 4 – 5
Exchange Rate Determination
Measuring currency movements
Foreign currency supply and demand relations
Factors influencing exchange rate movement
Interest rate parity & purchasing power
Parity conditions & Fischer effect.
Week 6 CAT
Week 7– 8
Foreign Exchange Risks
Forecasting foreign exchange rates
Meaning of foreign exchange risk
Management of foreign exchange risks
Week 9 – 10
Multinational Investment Decision
Direct foreign investment a cost-benefit analysis
Country risk analysis: need for, and risk measurement
Multinational capital budgeting
The need for international tax planning
Factors influencing international tax planning
Week 11 - 12
Multinational Long Term Financing Decisions
The MNC capital structure decisions
Cost of capital across countries
Creating target capital structure
Pecking order model and contradictions to the model
Choice of currency in MNC financing
Week 13
The Management of Working Capital
International cash management; centralized versus subsidiary based management
perspectives
Short term financing sources and their effective cost: financing with portfolio of
currencies
Week 14 FINAL EXAMINATION
COURSE ASSESSMENT
Term Paper/ Class presentations 10%
Tests 20%
Final Examination 70%
Total 100%
Reading List
1. Alan C. Shapiro 2003: Multinational Financial Management (7th edition) John Wiley and
Sons Inc.
2. Eitman D. K. and Stone Hill A. J. (Latest edition)
Multinational Business Finance (Latest edition). Addison – Wesley Publishing Co.
3. Levi D. Maurice (Latest edition)
International Finance (Latest edition) Mc. Graw Hill
