Question

Using the key concepts, you have learned in chapters 10 and 11, write a minimum of a 3 page paper on 1 of the following subjects from the perspective of the CFO:

1-You are starting a new company and are trying to come up with your optimal capital structure. Describe the nature of your business and why you believe your capital structure to be the best fit for your company. An example may be that you are attempting to open an on-line shoe company, or perhaps a neighborhood coffee shop.

2- You are CFO of any real company today and are thinking of rolling out a new project. Describe the rationale that goes into the project, resources used, and expected return on said project. An example might be Apple rolling out the new Apple Watch.

Your paper should mention key concepts from the last 2 weeks’ readings such as WACC, NPV, Capital Budgeting, IRR, etc. The idea is to see you take a stab at the numbers to see what it is like to be in the position of CFO and the thought process involved. Please complete paper in APA format and cite all resources.

Answer 1

The business that I am looking to start is that of an adult education company operating initially solely via the internet which can slowly expand into physical communications between subscribers and speakers as well.

Since this is a startup, there will not be many investors or capitalists looking to invest money at the offset. Thereby, the planned capital structure will comprise of personal investments and loans form financial institutions. The loans taken will have an initial moratorium period which means there will be no outflows of cash during the initial 2 -3 years so that the company gets a basic time to strengthen its financials before having to worry about interest outflows. Also, controlling the equity portion myself will ensure unity of direction and unity of command.

As the CFO of the company, it is my duty to ensure that we are moving towards an economically viable objective and that the methods or machines being aimed to be used provide us with the desired profit we are looking at. The objective must first be looked into. This will be decided upon based on the analysis of consumer habits and preferences in the market. Next we look into the cost- benefit analysis of the product in consideration. With faulty or overpriced resources, a company can never move towards profits. The next step would be to look at the loans and other liabilities of the business. finally we look into the desired ratios that need to eb amintained and achieved.