For this Discussion, imagine the following scenario:
You are the director of operations for your company, and your vice president wants to expand production by adding new and more expensive fabrication machines. You are directed to build a business case for implementing this program of capacity expansion. Assume the company’s weighted average cost of capital is 13%, the after-tax cost of debt is 7%, preferred stock is 10.5%, and common equity is 15%. As you work with your staff on the first cut of the business case, you surmise that this is a fairly risky project due to a recent slowing in product sales. As a matter of fact, when using the 13% weighted average cost of capital, you discover that the project is estimated to return about 10%, which is quite a bit less than the company’s weighted average cost of capital. An enterprising young analyst in your department, Harriet, suggests that the project is financed from retained earnings (50%) and bonds (50%). She reasons that using retained earnings does not cost the firm anything since it is cash you already have in the bank and the after-tax cost of debt is only 7%. That would lower your weighted average cost of capital to 3.5% and make your 10% projected return look great.
Based on the scenario above, post your reactions to the following questions and concerns:
What is your reaction to Harriet’s suggestion of using the cost of debt only? Is it a good idea or a bad idea? Why? Do you think capital projects should have their own unique cost of capital rates for budgeting purposes, as opposed to using the weighted average cost of capital (WACC) or the cost of equity capital as computed by CAPM? What about the relatively high risk inherent in this project? How can you factor into the analysis of the notion of risk so that all competing projects that have relatively lower or higher risks can be evaluated on a level playing field?
- Post your initial/main response to later Sunday, October 25 at 11 PM EST
- Read and respond to at least 3 of your classmates. Below are suggestions on how to respond to your classmates’ discussions:
a. Ask a probing question, substantiated with additional background information, evidence, or research.
b. Share an insight from having read your colleagues’ postings, synthesizing the information to provide new perspectives.
c. Offer and support an alternative perspective using readings from the classroom or from your own research.
d. Validate an idea with your own experience and additional research.
e. Make a suggestion based on additional evidence drawn from readings or after synthesizing multiple postings.
f. Expand on your colleagues’ postings by providing additional insights or contrasting perspectives based on readings and evidence.
Rene Descartes and the Question of How to Treat Reality GuidesorSubmit my paper for investigation rene descartesRene Descartes was especially acclaimed for endeavoring to show up at certain crucial rules that could be without a doubt considered as evident. The strategy Descartes decided to move toward this difficult errand was to address everything and anything. In his Meditations on First Philosophy [Bennett, 2010], Descartes concentrated on the issue of recognizing alertness and dreaming. How might we say what the truth is if there is the likelihood that we are basically dreaming it? The French scholar contends that there is no solid sign to tell when we are dreaming, and when we are in truth encountering reality. Being profoundly strict, the logician proceeds to propose this may be a stunt of some "guile evil spirit" [Blom, 1978] who attempts to delude credulous spirits by prompting them accept that whatever is around them is genuine which, truth be told, is a bogus suspicion. The inquiry that Descartes raised approximately 400 years prior has bewildered me and made me question whether it is at all sane to question all that we see through hearing, seeing, contacting, tasting, and smelling. To me, such a pointless tact is somewhat unjustified and preposterous. We accept what we need to accept. At whatever point we attempt to comprehend why individuals join a clique or participate in an extraordinary quick, accentuation ought to be set on wants. In any event, when we deny ourselves, we as a rule do it trying to pick up what we want: a thin figure, a commendation or an appreciating look, absolution or regard. At the point when we decide to accept or question, we do it for an explanation that we probably won't admit to ourselves or others, however there is constantly an explanation. In this way, when we can't think about an explanation not to confide in our faculties, at that point for what reason would it be a good idea for us to question it? Its a well known fact that what we accept gets each opportunity of getting valid, regardless of whether it isn't as of now in our apparent reality. Perception strategies, mental preparing, and gestalt treatment classes that have increased huge prevalence in the previous 20-25 years all train us to control what we think, to concentrate on positive deduction, and to destroy those internal outskirts of our still, small voice that reveal to us our fantasies are difficult to accomplish, our aptitudes are constrained, and our chances are not many. Let us decide to accept the inverse, and not question the chance of us being the bosses of our lives, so that no 'finesse evil presence' can occupy us with bogus observations and lose us the correct way. I think it is against the idea of our body and psyche to question our own faculties at each point in time. We were made with the five faculties for an explanation, regardless of whether it was by God, essentially, or some other extraordinary power—whatever the hypothesis one wishes to help. It is hard to question the way that we work the manner in which we work, and see the manner in which we see. We don't have the smell of a dog, or seeing a bird, and we don't hear ultrasound. In any case, perhaps that is on the grounds that we shouldn't. Let us concede that there is data that humankind doesn't have a clue, a huge number of disclosures are yet to be made, billions of fantastic disclosures to stun mankind in the years to come, and considerably more that remaining parts unfamiliar by us. Does that make our lives silly? I don't think so. I decide to accept that what I see is valid, what I sense is dependable, and that no devil aside from my own insane creative mind can delude me with any perpetual quality. References Bennett, J. (2010). Reflections on First Philosophy in which the Existence of God and the Distinction between the Human Soul and Body are Demonstrated. Rene Descartes. (pp. 1-36). Blom, J. J. Descartes. His Moral Philosophy and Psychology. New York University Press, 1978.>GET ANSWER