There are two major decisions faced daily by the company's financial manager: making good investment and good
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There are two major decisions faced daily by the company's financial manager: making good investment and good financing decisions. Investment decisions involve identification of investment opportunities and deciding how much to invest in each project often referred to as capital investment projects Financing decisions involve the form and amount of financing of a firm's investmentsprojects If the project's value is greater than its required investment, then the project is attractive financially. An effective financial manager guides their firm to invest in projects that add more value than the investment required. A company can only raise funding for their investments not covered by their operating funds by two methods. These two methods are: debt use of outside borrowings such as loans; equity sell stocks or bonds to investors. A company's capital structure is its mix of longterm debt and equity financing. Financial manager is responsible for shortterm financing decisions cash flow needs and shortterm investment decisions invest spare cash Businesses are inherently risky, so the financial manager has to identify risks and make sure they are properly managed. Your task: Identify each of the following as either capital budgeting investment or financing decisions. Hint: In one case the answer is "both". Very briefly explain why in each case.
a Intel decides to spend $ billion to develop a new microprocessor.
b Volkswagen borrows million euros from Deutsche Bank.
c Royal Dutch Shell constructs a pipeline to bring natural gas onshore from a production platform in Australia.
d Avon spends million euros to launch a new range of cosmetics in European markets.
e Pfizer issues new shares to buy a small biotech company.
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