Thursday, October 31, 2019

Case Study - Rumpole Ltd Essay Example | Topics and Well Written Essays - 2500 words

Case Study - Rumpole Ltd - Essay Example The positive NPV indicates that the company will generate sufficient cash inflows, which will cover the initial investment and generate profits for the company. The payback period is also estimated at 2 23/69 years. The project has a positive NPV and the payback period appears to be reasonable (Kinney & Raiborn, 2008). On the basis of the project evaluation with positive NPV and reasonable payback period, it could be recommended to the company that it should go with the project. Since, the company is currently considering only one project therefore, it will be appropriate for the company to go ahead with the project. Otherwise, the company should consider other projects, which have higher positive NPV and short payback period (Maher et al., 2012). The financing required for the project requires assessment of different types of funding sources available to the company. Since, Rumpole Ltd. is a private company, therefore it will not be possible for the company to acquire its funding from issuance of share capital or debt instrument in the secondary market. The company has two options from which it could raise capital for the net project. These include raising funds from internal equity and / or external debt financing. Internal equity comprises of retained earnings of the company. These earnings are accumulated over the year and disclosed on the face of the company’s balance sheet. These earnings are available to the company for investing into the company’s existing operations or investing in the new project, which the company is considering at the moment (Brigham, 2013). Managing retained earnings require time. In short run, the company will have to manage its working capital. Active recoveries will work a lot. Aging of the receivables should be monitored actively. Buffer levels of inventory should be lowered so that lesser amount is bound in stock. On the other hand, the company can also raise from external sources. The company can

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