The company I decided to discuss as far as my investment is The Purse Fairy Boutique. As stated, before the company is a purse company that sells purses from other vendors. However, the investment project is the start our own purse line with a manufacturer and slowly transition into selling our purses only. The project would cost $500 to create one purse and $50 per duplicate purse after the original is made. Therefore, all together to purchase 50 purses and make a designed purse would be $3,000 plus the cost of shipping. Each purse would be sold at $100 therefore the $50 the company pays for the purse plus the shipping is covered and profit is made. There are a few risks that may occur from this investment project. The risks are a low number of customers and potential customers liking and purchasing the purses, customers may not want to pay the price the purses are sold at, and the company not reaching the correct targeted audience who can afford the purses. I believe the company is very capable of taking on the risks because the company has a large following on social media to market and promote well, the company does not have many bills to pay, the company knows how to seek financial support if needed and the company knows to invest small while growing. "The trade-off between risk and return is also an important concept for companies trying to create value for their shareholders" (Brigham, & et. al 2022). Companies should always have a goal to create value for their shareholders to gain more shareholders and increase the investments by shareholders. "Panel b of Figure 8.1 suggests that if a company is investing in riskier projects, it must offer its investors (both bondholders and stockholders) higher expected returns" (Brigham, & et. al 2022). If the company decides to borrow the money to invest in the project, then the company is willing to offer higher expected returns because there are a few risks that may occur. However, the company should invest in the project despite the risks because they are not guaranteed risks that will occur.

References

Brigham E. F., & Houston, J. F. (2022). Risks and rates of return. InFundamentals of financial management(16th ed., pp. 273-308). Cengage Learning.

Respond to your colleagues' posts in one or more of the following ways:

• Ask a question about or provide an additional suggestion for the risks that your colleague's organization might face if it engaged in the capital investment project.
• Provide an additional perspective on the level of risk associated with the project your colleague identified for their selected organization or on how willing/capable the organization might be in taking on and managing the risks your colleague identified.
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