Suppose your business has $7 million set aside for an expenditure in three months. How would...

Suppose your business has $7 million set aside for an expenditure in three months. How would you choose to invest it in the meantime? Would your decision be different if there were some chance that you might need the money earlier?

Expert Solution

Answer

The investment of $7 million will depend on the nature or the type of investment needed for the organization. Suppose if it is needed for the organization to invest in a project, then as a project will fall under the responsibility of the manager to check the viability of the project. The certain calculation which is the NPV or IRR valuation is needed and if the NPV of that project is positive then it will be better for the manager to opt for such kind of investment during the process. In the meantime, it is important for the top-level management system of the business to segregate the various potential project and investment in those profitable projects will help the business to earn profit in the future.

If the money is required somewhat earlier than the three months investment then it is needed for the finance manager to take some of the significant steps. It will be better for the company to issue equity or debt to raise finance in the business for an amount of $7 million. By raising fund it is then needed to make the potential business investment in the profitable project opportunities obtained by the organization.

jeff jeffy answered 6 months ago

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