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Fundamentals of Corporate Finance, 4/c/e

Fundamentals of Corporate Finance, 4/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Bradford D. Jordan, University of Kentucky
Gordon S. Roberts, York University

International Corporate Finance

Internet Application Questions


1		The following web-links are related to equities that trade on foreign exchanges in the form of depository receipts. Trading on foreign exchanges allows the issuing firm to raise capital internationally, and benefit from increased scrutiny by foreign analysts. What are American Depository Receipts (ADRs)? How are ADRs created? Go the following website operated by JP Morgan, the company that pioneered the use of ADRs in 1927. Look under Overview. http://www.adr.com/. What are the advantages of investing in ADRs vis-à-vis the underlying foreign stock? The Bank of New York is an important player in sponsoring ADRs. Go to its website at http://www.bankofny.com/adr/adir.htm and search for Hitachi (CUSIP: 433578507) ADR. What is the price of Hitachi ADR on the NYSE? Explain the meaning of RATIO on the ADR listings page. If 1USD = ¥100, what do you think is the price of Hitachi's shares on the Tokyo Stock Exchange (in ¥)? You can find Hitachi's share prices on the TSE's website at http://www.tse.or.jp/english/index.shtml. Go to the following website operated by Citibank, another big player in the ADR creation market. http://wwss.citissb.com/adr/www/adr_info/index.htm. Explain how the dividend payment process works for ADRs. As a Canadian investor, do you face more foreign currency risk when you buy Hitachi's ADRs on the NYSE, or Hitachi's shares on the Tokyo Stock Exchange?

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