Risk, Return, Capital, Budgeting, and Weighted Average Cost of Capital
Topic: There is a common phrase in business: cash is king. “Cash flow is the life-blood of a company. Without it, a company will fail” (Hicks, 2012). Yet, companies often have to take risks that could potentially jeopardize their cash flow (e.g. new projects, growth, capital budgeting, etc.). Assume you are the CFO of a struggling company. While you do have a positive cash flow, it is minimal at best. If something does not change soon, the company will go under. Fortunately, your product development team has just created a new product that will not only save the company from financial demise, but the product will revolutionize how the industry does business. The problem is that the product is still two years away before it can be sold to the public, and you will run out of cash within the next six months. How would you propose obtaining the funds needed to keep the company alive and thriving for the next two years until you are able to see a return on the product development, and keep the stakeholders happy?
Subjects: Risk, Return, Capital, Budgeting, and Weighted Average Cost of Capital…
300 Words
APA Format
2 Scholarly Citations
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Capital budgeting
Though the new product development is thought to bring a positive return on investment, it will take long and the company will run out of cash for its daily operations. The cash inflows and outflows have also been assessed and results found out that the returns that will be generated from the new product development will try to meet the sufficient target benchmark and solve the financial distress of the company. It will be therefore wise to obtain funds that will be necessary to keep the company alive until the new product development…
APA
398 words
