Part 1 Role of senior financial adviser , Muti-national Environment  跨国环境高级财务顾问的角色

-Advanced investment appraisal

-Acquisition and mergers

-Corporate reconstruction and re-organisation

-Treasury and advanced risk management techniques 

Part 2 Profession skills 职业技能

-Communication

- Analysis and evaluate

- Skepticism

- Commercial acumen 

Part 3 Current WACC

WACC = Ke ×EE+D + Kd × (1-t) × DE+D

Part 4 Credit rating 信用评级

Credit risk assessment is done by credit rating agencies, such as famous Standard Poor and Moody's and Fitch. 

信用评级信用风险评估由著名的Standard Poor、Moody's和Fitch.等信用评级机构进行

⚫ Factors affect credit rating 影响信用评级的因素

Part 5  calculate MV of bond 计算债券的MV

5 steps:

Step 1: Calculate government yield (Rf1-n)

Step 2: Calculate Kd(1-n) = risk free rate1-n + credit spread 1-n

Step 3: Calculate MV of redeemable bondMv of bond= coupon(1+r1)1 +coupon(1+r2)2 +…coupon+repay capital(1+rn)n

Step 4: Kd (IRR)

step 5: Kdat

Part 6 Risk adjusted WACC 

1 BR change and FR unchanged

(1) If BR change by entering into a new industry

Step 1: De-gear (CAPM) Find a proxy company, de-gear it

Step 2: Regear (add the current financial gearing)

Step 3: Use CAPM to calculate a new Ke

Step 4: Calculate post-tax cost of debt

Step 5: Calculate risk adjusted WACC

(2) If BR change by cutting an industry (i.e. sell off) 

Step 1: De-gear(CAPM)De-gear own beta equity to find the Beta asset βasset = βequity *EE+D(1-t)

Step 2: Use weighted average beta asset to find the needed beta assetβa(x+y)= βa(x) * x% + βa(y)*(1- x%)Note: x% is the weighing of X industryCompany's riskBusiness risk Financial riskNew project's riskBusiness risk Financial risk

Step 3: Regear (add the current financial gearing)

Step 4: Use CAPM to calculate a new Ke

Step 5: Calculate post tax cost of debt

Step 6: Calculate risk adjusted WACC

BR unchanged and FR changed 经营风险未变，财务风险已变

Step 1: De-gear (CAPM) De-gear own beta equity to find the Beta asset

Step 2: Regear (add the new financial gearing）

Step 3: Use CAPM to calculate a new Ke

Step 4: Calculate post-tax cost of debt

Step 5: Calculate risk adjusted WACC

 BR changed and FR changed If BR change by reducing an industry (i.e. sell off) 商业风险变化和财务风险，通过减少一个行业而变化

Step 1: De-gear(CAPM)De-gear own beta equity to find the Beta asset βasset = βequity *EE+D(1-t)Step 2: Use weighted average beta asset to find the needed beta assetβa(x+y)= βa(x) * x% + βa(y)*(1- x%)Note: x% is the weighing of X industry

Part 6 M+M 

1 M+M(without tax) In 1958 Franco Modigliani and Merton Miller stated that a company's level of gearing capital structure has no effect on shareholder wealth.

2 M+M (with tax) In 1963 M+M modified their model to reflect the fact that the corporate tax system gives tax relief on interest payments. 

The Assumptions Of MM

It assumes in a perfect capital market Tax ignored Investors are rational No transaction costs The expectations about future risk and returns are the same It ignores bankruptcy risks

假设在一个完美的资本市场中忽略的税款投资者是理性的无交易成本对未来风险和回报的预期是相同的忽略了破产风险

Part 7 Pecking order 融资顺位

- Internally generated funds (retained earnings)内部产生的资金（留存收益）

 Do not have to spend any time persuading outside investors of the merits of the project.

 No issue costs.

- Debt

 Moderate issue costs.

 The degree of questioning and publicity associated with debt is lesser than share issue.

- New issue of equity

 Expensive issue costs.

 Extensive questioning and publicity associated with a share issue.

Part8 Bilateral tax treaty 双边税收协定

-If foreign tax rate is lower

  Additional tax will be levied on the remitted cash flow 将对汇款的现金流征收附加税

-If foreign tax rate is higher

 No additional tax will be levied

Part9 PPPT - Purchasing power parity theory

claims that the rate of exchange between two currencies depends on the relative inflation rates within the respective countries. 

两种货币之间的汇率取决于各自国家的相对通货膨胀率。

Part10 IRPT-Interest Rate Parity theory

it claims that the difference between the spot and the forward exchange rates is equal to the differential between interest rates available in the two currencies

即期汇率和远期汇率之间的差额等于两种货币可用利率之间的差额

Part11 Political risk

-Negotiate with the host government

To obtain a concession agreement. (i.e. access of local finance; government intervention;taxation; transfer pricing; transfer capital; remittances etc.)

- Insurance 

Export Credit Guarantee Department provides protection against various threats,including nationalisation; currency convert; war etc

- Management structure

Instead of setting up a subsidiary, possible methods may include joint ventures to local investors and obtaining profits by a management contract.

- Production strategies

Balance between contract out to a local source (thus losing control) and producing directly(which increases the investment and also potential loss)

- Financing strategies

 To avoid expropriation of assets, financed from locally as much as possible. Gain unconditional guarantee from the host government. 

 Part12 Litigation risk

- Anti-monopoly

- International patents

-Trademarks

- Copyrights

- Promotion messages, methods

- Export and import controls(for health and safety reasons)

Part13 Culture risk

Culture risk affect the products and services produced and the way organisations are managed and staffed.i.e. Different way of doing business, media and distribution system, firm use its own ‘national culture’ as a selling point etc

Part14 Economic risk

Economic risk arises from changes in economic policy in the host country that affect the macro-economic environment in which the multinational company operates. 

Part15  Issue costs  发行成本

-Grossing up

 Yes--If the issue cost is some % of the gross funds (issued value) No--If the issue cost is some % of (on) the funds needed for investment

-Discounting

-Calculate interest consider Yes-if paid out of the funds raised No-if paid cash reserve 

Part16 Value of an option = intrinsic value + time value 期权价值=内在价值+时间价值

- Intrinsic value: is the value of the option if it was exercised now.

- Time value: the difference between the market price of an option and its intrinsic value.