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Федеральное агентство по образованию

Государственное образовательное учреждение высшего образовательного образования

Санкт-Петербургский государственный университет экономики и финансов

Кафедра международных экономических отношений


по дисциплине:

«Международный финансовый менеджмент»





on discipline: “International financial management”


Table of content:



1.1. Background 6

1.2. Problem and research questions 6

1.3. Aim and Limitation 6

1.4. Outline of thesis 6

1.5. Abbreviation and definition 7


2.1. Approach 8

2.2. Data collection method 8

2.3. Primary data 9

2.4. Secondary data 9

2.5. Data processing 9

2.6. Validity, reliability and generalization 10


3.1. Principal-Agent Problems 10

3.2. WACC and opportunity cost of capital 11

3.3. CAPM and APT 12

3.4. Estimating β 13

3.4.1. Operating leverage and β 13

3.5. The risk and discount rates for international projects 14

3.6. Purposes of performance measurement 14

3.6.1. EVA, Book ROI, and EP 15

3.7. Working capital, depreciation and tax 16


4.1. Review of pharmaceutical market in Russia 17

3.1.1. Russian companies and them place in market 17

3.1.2. Pharmaceutical company “Zdorovie Ludi” 17

3.2. Research strategy (Roadmap of decision) 18

3.3. International and European contracts 19

3.4. National contracting in a global economy 20

3.5. National contract low and human rights 21

3.6. (Step 1) Juristic analyses and common mistakes of the contract 21

3.6.1. The formation and scope of a contract: 22

3.6.2. The content of a contract: 22

3.6.3. Policing a contract: 24

3.6.4. Performance, discharge and breach of the contract: 24

3.7. (Step 2) Controlling of strategy and consideration the contract as investment project 25

3.8. Transformation the contract to the invest project 26

3.9. (Step3) Forecast of outflow and inflow 27

3.10. (Step 4) Determination the risk and discount rate 28

3.10.1. Country risk analysis 29

3.11. Commercial counterparty risk analysis 30

3.12. (Step 5) Procedure of estimation and comparison of the contract 32

3.13. Book Rate of Return (Advantages and disadvantages) 32

3.14. Payback Period and Discounted-Payback Period 34

(Advantages and disadvantages) 34

3.15. Internal (or discounted-cash-flow) rate of return (IRR) and MIRR 34

(Advantages and disadvantages) 34

3.15.1. Lending or borrowing position 35

3.15.2. Multiple rates of returns 36

3.15.3. Mutually exclusive projects 37

3.16. The cost of capital for near-term and distant cash flows 38

3.17. Profitability Index (PI, advantages and disadvantages) 38

3.18. Net Present Value (NPV, advantages and disadvantages) 39

3.18.1 Calculate NPV with glance of inflation 40

3.18.2 Calculating NPV in other countries and currencies 42

3.19. (Step 6) Performance and agency problems 42



4.1. Simulation model analysis and calculation 43

4.2.1. WACC as discount rate 44

4.2.2. Manager’s working capital use penalty points 44

4.2.3. Risk-Adjusted Discount Rate (RADR) and CEQ 46

4.3. Summary of Simulation model analysis 48

4.4. Scenario analysis and calculation 48

4.4.1. Discount rates that based on WACC 48

4.4.2. Discount rates that based on RADR 49

4.5. Summary of scenario analysis 50

4.6. Final analysis and Decision Card (Step 7) 52

4.7. What could be improved and suggestion for future research. 53

This thesis has tried to adopt a invest decision approaches to valuing the cross-border contract. Further empirical work is required to test this approaches in real business. I did a lot of assumption in research. The main problem was gaining access to the reliability data it was a major barrier. 53



Appendix 1 – 7 (Simulation Model and Scenario analysis calculation) (Excel) 58

Appendix 1 (Excel) 58

Appendix 2 (Excel) 58

Appendix 3 (Excel) 58

Appendix 4 (Excel) 59

Appendix 5 (Excel) 59

Appendix 6 (Excel) 60

Appendix 7 (Excel) 60

Appendix 8 (Interview questions and structure of survey) 61

PART 1 61

A) Survey for managers 61

B) Survey for specialist 61

PART 2 62

Survey of experts 62

Part 3 Results and Conclusion 64

A) Survey for managers 64

B) Survey for specialist 64

C) Survey of experts 64


Problems: Companies usually solve two financial questions: What kind of investments should the company make? How should the company pay for those investments? The first question involves spending money; the second one involves raising it. The same questions are solved by the firm when it has export-import business. The companies spend money for goods then sale them thus raising money and making profits. That is why, in our research I treat a contract as an investment.

The main target of the financial management is to increase value of the company. The strategy of the company is collecting the information on which financial decisions are based and use financial tools in convenient situation. Financial manager must decide not only which projects (contracts) their firm should invest, but also where those contracts should be located and a manager should understand the difference between national and international financial markets. Therefore managers must know how to estimate the contract (project) in the country with different currencies, interest rates, inflation rates, and tax systems.

A company usually has a separation of ownership and management. It is practical necessity and clear advantages. Authority and responsibility has to be delegated from owners to senior managers, from senior managers to junior managers, and they should be involved into the process of making decisions. Owners want managers to increase value of the company, but managers may have their own interest different from owners’. For example, managers may seek more relaxing or luxurious working lifestyle, they may avoid unpopular decision, or they may attempt to build an empire with their shareholders money. Such conflicts between owners (shareholders) and manager’s objectives create principal-agent problems. The same problems turn up between senior management and junior management. The senior manager needs to think about the way to motivate junior manager in the company. In this case, senior managers are the principals and junior managers and other employees are their agents. The company constantly tries to find out the possibility to delegate some responsibility to the junior management. In this case, the determination of decision and responsibility level of junior management becomes the real assets the firm holds. That is why, it is the important investment decision too.

The success of a company depends on how well it harnesses everyone to work to a common result. Businesspeople try to avoid the conflict and try to find balance of interests between owners (shareholders) and senior managers, between senior managers and junior managers. That is why, finance is not only about money and markets, but it is also about people.

Theory: The relevant applicable theories which are connected with research questions and the aim are the following: “Corporate Finance” – we use finance methods and tools for decision, “Performance Management” – I use methods which help us to solve principal-agent problems, “Bank Management” – I use methods of estimation the creditworthiness for good look the statement of counterparty of contract, “Trade Finance” – estimation the techniques of international payment, “Contract Law” – methods of distinguishing the common mistake cross-border contracts, “ Principal-Agent Theory” – it helps to solve problems between owners and management.

Conclusions: They are dedicated to the following aspects: method for contract estimation, principal-agents problems, and importance of dates for decision makers. In the conclusion all the important results which have been received after simulation model and scenario analysis are summarized and generalized.

Previous research: Adolf A. Bearle, Gardiner C. Means, with a new introduction by Murray Weidenbaum & Mark Jensen, originally published in 1932, Ninth printing 2007 by Transaction Publishers, New Brunswick(U.S.A.) and London(U.K.) “The Modern Corporation & Private Property”, F. Modigliani and M.H. Miller, “The Cost of Capital, Corporation Finance and the Theory of Investment,” American Economic Review 48 (June 1958), E.E. Fama, “Discounting Under Uncertainty,” Journal of Business 69(October 1996), W.F. Sharpe, “The capital Asset pricing Model: A ‘Multi-Beta’ Interpretation,” in H. Levy and M. Sanat (Eds), Financial Decision making under Uncertainty, Academic Press, NY, 1977.

Keywords: common mistakes, transformation to the invest project, invest decisions methods, principal-agents problems, pyramid of ratios, practical situations, adaptation.

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