Give your opinion on already posted responses

Can you help me understand this Management question?

There are three responses attached to a topic posted below . Please read all of them and give your opinion on them separately.

Read Response-1 Response-2 and Response -3 attached and give your opinion on ALL responses separately. your answer should be supported with research unless the question is opinion oriented.. Responses to discussions below should not be “I agree” or “I like the way you stated that.” These responses should again be insightful, offering an opinion or facts based on your research and experiences. The opinion to both responses should be a minimum of 200 words each . See APA criteria for citing resources.

The below responses are for the question “Cost of Capital

In the links below, you will explore how companies compute their cost of capital by computing a weighted average of the three major components of capital: debt, preferred stock, and common equity. The firm’s cost of capital is a key element in capital budgeting decisions and must be understood in order to justify capital projects.

Cost of Capital

For this Discussion, imagine the following scenario:

You are the director of operations for your company, and your vice president wants to expand production by adding new and more expensive fabrication machines. You are directed to build a business case for implementing this program of capacity expansion. Assume the company’s weighted average cost of capital is 13%, the after-tax cost of debt is 7%, preferred stock is 10.5%, and common equity is 15%. As you work with your staff on the first cut of the business case, you surmise that this is a fairly risky project due to a recent slowing in product sales. As a matter of fact, when using the 13% weighted average cost of capital, you discover that the project is estimated to return about 10%, which is quite a bit less than the company’s weighted average cost of capital. An enterprising young analyst in your department, Harriet, suggests that the project is financed from retained earnings (50%) and bonds (50%). She reasons that using retained earnings does not cost the firm anything since it is cash you already have in the bank and the after-tax cost of debt is only 7%. That would lower your weighted average cost of capital to 3.5% and make your 10% projected return look great.

Based on the scenario above, post your reactions to the following questions and concerns:

What is your reaction to Harriet’s suggestion of using the cost of debt only? Is it a good idea or a bad idea? Why? Do you think capital projects should have their own unique cost of capital rates for budgeting purposes, as opposed to using the weighted average cost of capital (WACC) or the cost of equity capital as computed by CAPM? What about the relatively high risk inherent in this project? How can you factor into the analysis of the notion of risk so that all competing projects that have relatively lower or higher risks can be evaluated on a level playing field?”


Give your opinion on already posted responses

I’m studying for my Management class and don’t understand how to answer this. Can you help me study?

There are three responses attached . Please read all of them and give your opinion on them separately.

Read Response-1, Response-2 and Response 3 below and give your opinion on all three responses separately. your answer should be supported with research unless the question is opinion oriented.. Responses to discussions below should not be “I agree” or “I like the way you stated that.” These responses should again be insightful, offering an opinion or facts based on your research and experiences. The opinion to three responses should be a minimum of 200 words each . See APA criteria for citing resources.

Below are additional suggestions on how to respond to your classmates’ discussions:

· Ask a probing question, substantiated with additional background information, evidence or research.

· Share an insight from having read your colleagues’ postings, synthesizing the information to provide new perspectives.

· Offer and support an alternative perspective using readings from the classroom or from your own research.

· Validate an idea with your own experience and additional research.

· Make a suggestion based on additional evidence drawn from readings or after synthesizing multiple postings.

· Expand on your colleagues’ postings by providing additional insights or contrasting perspectives based on readings and evidence.

The three responses for this Question: “Part 1: Importance of Cash

Generating cash is the ultimate responsibility for managers today. Cash and cash flow are considered the “lifeblood” of a business.

How important has cash generation been for your current company or a prior employer? How is cash generation different from the concept of profit and loss (P&L) in accounting? Provide an example of how a company manages cash flow.

Part 2: Application of Concepts/Financial Analysis

Review the materials in the link below. Based on the materials presented in this link, discuss why financial analysis is important in the overall understanding of the financial performance of a firm. Be specific and give examples based on your experience or research.

https://courses.lumenlearning.com/boundless-accounting/chapter/overview-of-financial-statement-analysis/


Give your opinion on already posted responses

Can you help me understand this Management question?

There are three responses attached to a topic posted below . Please read all of them and give your opinion on them separately.

Read Response-1 Response-2 and Response -3 attached and give your opinion on ALL responses separately. your answer should be supported with research unless the question is opinion oriented.. Responses to discussions below should not be “I agree” or “I like the way you stated that.” These responses should again be insightful, offering an opinion or facts based on your research and experiences. The opinion to both responses should be a minimum of 200 words each . See APA criteria for citing resources.

The below responses are for the question “Cost of Capital

In the links below, you will explore how companies compute their cost of capital by computing a weighted average of the three major components of capital: debt, preferred stock, and common equity. The firm’s cost of capital is a key element in capital budgeting decisions and must be understood in order to justify capital projects.

Cost of Capital

For this Discussion, imagine the following scenario:

You are the director of operations for your company, and your vice president wants to expand production by adding new and more expensive fabrication machines. You are directed to build a business case for implementing this program of capacity expansion. Assume the company’s weighted average cost of capital is 13%, the after-tax cost of debt is 7%, preferred stock is 10.5%, and common equity is 15%. As you work with your staff on the first cut of the business case, you surmise that this is a fairly risky project due to a recent slowing in product sales. As a matter of fact, when using the 13% weighted average cost of capital, you discover that the project is estimated to return about 10%, which is quite a bit less than the company’s weighted average cost of capital. An enterprising young analyst in your department, Harriet, suggests that the project is financed from retained earnings (50%) and bonds (50%). She reasons that using retained earnings does not cost the firm anything since it is cash you already have in the bank and the after-tax cost of debt is only 7%. That would lower your weighted average cost of capital to 3.5% and make your 10% projected return look great.

Based on the scenario above, post your reactions to the following questions and concerns:

What is your reaction to Harriet’s suggestion of using the cost of debt only? Is it a good idea or a bad idea? Why? Do you think capital projects should have their own unique cost of capital rates for budgeting purposes, as opposed to using the weighted average cost of capital (WACC) or the cost of equity capital as computed by CAPM? What about the relatively high risk inherent in this project? How can you factor into the analysis of the notion of risk so that all competing projects that have relatively lower or higher risks can be evaluated on a level playing field?”