Rationale for investment The business is offering these bonds for sale contracts with another business in China
Question:
Rationale for investment The business is offering these bonds for sale contracts with another business in China to assemble computer parts. The Chinese business has used child labor in the past, but it claims it has stopped this practice. However, the U.S. business selling these bonds has not investigated to verify whether these claims are true.
Assumptions to consider:
- 10-year bond
- 8% Coupon '
- Priced at a discount : $95
- Discount rate is 9%
Financial Option 2: Lease of $25 Million in Equipment
Rational for investment : The business's current equipment is efficient, but it uses a lot of electricity. The production line also creates significant waste material, including waste plastics. The business is looking into leasing newer, more environmentally friendly equipment that will still allow it to be at least as efficient in production as it is now.
Assumptions to consider :
- Annual cash flows generated with equipment: $4 million
- Discount rate is 12%
- 15-year useful life
- No salvage value
Financial Option 3: Purchase a $10 Million Building
Rationale for investment: The business is considering environmental, social, and corporate governance (ESG) factors as part of its investment in a new building for its headquarters. The building itself will be a Leadership in Energy and Environmental Design (LEED)-certified building. However, the new site currently has a large, inactive gas station that sold both gasoline and diesel fuel. The new site also has a large repair facility that was used for deliveries and tractor-trailer trucks for more than 50 years. Some restoration was performed on the site, but the previous owner ran out of funds before they could bring the site up to LEED standards. Four large fuel tanks remain on the site, and they will also need to be addressed per LEED standards.
Assumptions to consider:
- $10 million cash purchase
- Building generates additional net profits after tax of $1.25 million per year
- 20 year expected useful life of building
- Salvage value: $1.5 million
- Discount rate is 10%
Microsoft financial ratios
financial Evaluation : determine which of the three available investments are good financing options and describe the business's (Microsoft) likely future financial performance.
- Bond Investment : Determine if the bond investment is a good financing option for the business's financial health. Use your financial analysis and other financial information to your support claims.
- Capital Equipment : Determine if the capital equipment investment is a good financing option for the business's financial health. Use your financial analysis and other financial information to support your claims.
- Building : Determine if the building investment is a good financing option for the business's financial health. Use your financial analysis and other financial information to support your claims.
- Future Financial Considerations :Describe the business's likely future financial performance. Base your description on the business's current financial well-being and risk levels. Use financial information to support your claims.
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr