The Case of Change in Capital Structure Study

User Generated

noqhyynu12

Business Finance

Description

(1) Read the attached case study about Nima One.

(2) Answer each case question and submit evidence of all calculations toward any numerical support for your conclusions.

Skills

  • Compare capital funding methods and sources.
  • Apply the weighted average cost of capital (WACC) formula to a project’s cost of capital.
  • Calculate cash flows on capital budget projects.
  • Evaluate investment opportunities using various techniques such as net present value (NPV), internal rate of return (IRR), and payback period.
  • Describe risk in capital budgeting and strategies, such as sensitivity analysis, scenario analysis, and risk adjusted discount rate.
  • Assess decisions that affect the capital structure.
  • Evaluate a firm’s capital budgeting policies, planning, structure, and cost.

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Explanation & Answer:
5 Questions
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Attached.

RUNNING HEAD: CAPITAL BUDGETING

Title: Capital Budgeting-The Case of Change in Capital Structure.
Institution affiliation
Couse
Date

1

CAPITAL BUDGETING

2

Abstract
Capital budgeting is a very important aspect of any firm. It is useful in determining the
best way of allocating funds for various activities. The goal is to ensure that the idea of business
is financially viable. This is important since it is by the application of financial budgeting
techniques that a company is able to predict future profits and put in measures to enable it to
reach the set targets for every financial year.

Introduction
In our case study, we look at Nima One Company. It is a telecommunication company
that has a target of making profits. Despite several costly marketing campaigns, the company has
not been able to attract the forecasted number of the subscription. To prevent this failure to affect
future plans of the company, the co-founders of Nima One decided to change business plans for
the following year. They came up with two options. The first was proposed by the company’s
Chief Marketing Officer (CMO) who goes by the name Shadan. His idea was that the company
increases the frequency of advertising campaigns in order to increase the number of Nima One’s
yearly average of 1,000,000 subscriptions by 250% at the end of the coming year. The Chief
Executive Officer, however, had another idea that the company should contact the MCI, the
largest cellphone carrier in the country, to help increase the subscriptions. He preferred a new
idea rather than continuing to try on what already seems not to be working. We are therefore
going to look at the two...


Anonymous
Just what I was looking for! Super helpful.

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