Corporate Financial Management Investments -Myassignmenthelp.Com

Question: Discuss About The Corporate Financial Management Investments? Answer: Introducation The engineering firm should take the help of external sources of finance for purchasing of machinery/ equipment which is worth 4,00,000. It may take bank finance option that is the loan from the bank for a medium term of 5 to 10 years and should not use the retained earnings of the company. The reason for the same is that the company has to construct a new building also, the estimated cost of which is 1,50,000 for which the company might have used its owned funds (Henderson et. al, 2015). Hence, the company should not further exhaust its owned funds and take a bank loan for the same and pay it off in installments. The individual should either opt for long-term loan or take the building on lease. He should not use his own funds fully and only the margin money should be paid by him from his owned funds. The reason for the same is that he has lost his job and has received some payment as redundancy compensation. It is not viable for him to purchase a building by paying such huge amount of 180000 himself. Hence she should opt for external financing and most preferably on lease (Atrill, 2009). A large plc is planning on moving a major part of its production facility to Cornwall. The estimated cost of the new facility is 4.5 million which is a huge amount. The company might not get such a huge sum of the loan. It should opt for a combination of different sources as such a large amount cannot be raised through a single source of finance. The combination can be : The issue of shares company can raise funds by selling off its shares and the purchaser becomes the part owner of the company and gets dividends from the company (Henderson et. al, 2015). Sale of assets- if the company is having any assets that are no longer used, it can sell off such assets and raise funds. Bank Loan- the company can raise some funds through bank finance also. The club should opt for a bank loan and bank overdraft. But if the club has its retained earnings and it does not want to get into the huge obligation of the bank loans, it can use a combination of its owned funds and bank loans. The amount to be raised is a heavy amount and as such, it is not possible to finance it through internal sources alone. Hence it is advisable to take a loan from the bank. Also, the trade credit can be taken from the suppliers for short term from whom the material for revamping the ground will be taken (Correia et. al, 2005). The estimated cost of the new facility is 4.5 billion which is a huge amount. The company might not get such a huge sum of the loan. It should opt for a combination of different sources as such a large amount cannot be raised through a single source of finance. The combination can be : The issue of shares company can raise funds by selling off its shares and the purchaser becomes the part owner of the company and gets dividends from the company (Healy Palepu, 2012). The issue of debentures- debentures have a fixed rate of interest. Bank Loan- the company can raise some funds through bank finance also. The company can offer the issue of its debentures and shares to the seller company also as a part of purchase consideration. As the newsagent is in a rural area and might not have any funds in hand, he can take the option of applying for a government grant. The reason is that the purpose of purchase of an asset is the welfare of villagers and hence the government may grant some funds for that. Another option that can be taken is bank loan for short term or medium term and most preferably for medium term so that the loan can be divided into small installments and can be easily paid by the newsagent (Albrecht et. al, 2011). As the charity organization must be getting some funds during the year in the form of donation, it can use such funds as part finance for purchasing the new equipment and the remaining amount can be taken as a bank loan (Healy Palepu, 2012). In case there is a shortage of owned funds, the organization can also opt for the leasing of the equipment for few years. The cost of restaurant and gym which comes to around 95,000 should be met out with external sources of finance like bank loan for a medium-term of 5-10 years as the group has already incurred heavy expenses on the purchase of building and it will not be viable to use their internal funds such as their savings (Albrecht et. al, 2011). Hence they should approach a bank for a short-term loan up to 5 years. The equipment for the gym can be taken on lease basis also. At the end of lease term, the equipment will become the property of the group. References Atrill, P (2009). Financial management for decision makers. Prentice Hall. https://www.abufara.com/abufara.net/images/abook_file/Financial%20Management%20for%20Decision%20Makers.pdf Albrecht, W, Stice, E Stice, J. (2011). Financial accounting. Mason, OH: Thomson/South-Western. https://blogbook.co/by-w-steve-albrecht-james-d-stice-earl-k-stice-monte-r-swain-accounting-concepts-and-applications-with-annual-report-eleventh-11th-edition.pdf Correia, C, Mayall, P, O'Grady, B Pang, J. (2005). Corporate Financial Management, Perth: Skystone Investments Pty Ltd. Healy, P. M, Palepu, K. G. (2012). Business Analysis Valuation: Using Financial Statements. Cengage Learning. https://books.google.co.in/books?hl=enlr=id=sT8LAAAAQBAJoi=fndpg=PR5dq=Healy,+P.+M,+%26+Palepu,+K.+G.+(2012).+Business+Analysis+Valuation:+Using+Financial+Statements.+Cengage+Learning.+pdfots=NpfcFFD0sPsig=p7i--XKVy09Ttbf6cEPFD55eScI#v=onepageqf=false Henderson, S, Peirson, G, Herbohn, K, Howieson, B. (2015). Issues in financial accounting. Pearson Higher Education AU. https://www.pearson.com.au/products/H-J-Henderson-Scott-et-al/O-R-Peirson-Henderson-Herbohn-Artiach-How/Issues-in-Financial-Accounting/9781488611643?R=9781488611643