Question
Can i get a feedback for this discussion post below. Thank you You have just discovered that your boss favors payback in evaluating investments. Should
Can i get a feedback for this discussion post below. Thank you
You have just discovered that your boss favors payback in evaluating investments. Should you try to talk him out of it or should you go along with his/her desires?
Well I believe it all depends on the boss/company. If it was up to me depending on if the company cash flow was doing well, I wouldnt really have a desire for evaluating the payback on an investment, I would rather be interested on whether or not It will make me the most money. However, if cashflows were low and the company was in dire need for a payback on its investment then by all means, I would recommend him to evaluate the payback on investments.
Young companies usually finance their assets with equity. Why?
Equity is the investment money that is given from investors/owners of the company to the company. Equity is a great alternative in receiving money versus debt. It allows these young companies to get off their feet and have enough founds to operate and expand. Companies are not obligated to obligation to pay back the money received by investor. Investors are looking to make money of their investments through their returns. There is no required payments or interest charges. It is a real incentive for young companies to seek investors in order to be more successful and more competitive in the industry.
Maverick, J. (2015, April 22). What are the benefits for a company using equity financing vs. debt
financing? Retrieved September 20, 2018, from
https://www.investopedia.com/ask/answers/042215/what-are-benefits-company-using-equity-
financing-vs-debt-financing.asp
Equity financing can come from external or internal sources. Which of these is the least expensive and why?
Both these financing strategies are a great way for a firm to gain capital. External equity financing includes common stock and long-term bonds investments. Internal equity finance involves reinvesting earnings back into the company. So instead of giving the stockholders back some money they put that money back into the company to grow. Internal equity is the least expensive. Internal equity financing avoids flotation costs and adverse signals.
Ehrhardt & Brigham (2017). Corporate Finance (6th Edition). South-Western
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