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Corporate Financial Management | Corporate decision making

   

Added on  2019-11-14

11 Pages2629 Words163 Views
RUNNING HEAD: Corporate financial management 1Corporate Financial Management

Corporate financial management 2ContentsIntroduction.......................................................................................................................3Sensitivity Analysis..........................................................................................................3Scenario analysis..............................................................................................................5Break even analysis..........................................................................................................7Simulation techniques.......................................................................................................8Conclusion........................................................................................................................9References.......................................................................................................................11

Corporate financial management 3Introduction:Corporate decision making is a process which takes place at every stage in an organization. This process helps the company to make a better decision. These decisions are taken to support the organizational growth. Corporate decision making plays a crucial role in an organization. These decisions are mainly taken by the leader to manage the performance and the profitability of the organization (Lee. & Lee, 2006). Further, it has also been found that the corporate decision making helps the organization to set a link between the budgeted outcome and goals of the company and the actual goals of the company. In this report, capital budgeting has been taken into consideration and it has been analyzed that how corporate decision making process helps an organization into making the best decision about various investment opportunity and plans (Damodaran, 2011). This reportbriefs the user about various tools of corporate decision making which are helpful for the organization to make a better decision. Further, it has also been found that the following are some of the tools which could be useful for the company to manage the capital budgeting techniques:Sensitivity Analysis:Sensitivity analysis is a technique which is useful for the companies to evaluate the various values of an independent variable which makes an impact over the specific dependentvariable under some assumptions. Sensitivity analysis technique is technique which 9s mostlyuses by the organization to make a better decision about various investments such as return from one project and risk from other investment project. This analysis is helpful for the organizations to make and develop an effectual and effective business plan which is required by the companies to handle entire risk variables from the business functioning of the company and economical circumstances (Bornholt, 2013). Further, it has been observed that

Corporate financial management 4the sensitivity analysis aids the organization in managing the various activities in terms of choosing the best investment project for the company which offers high return to the company and the cash outflow is quite lesser than the cash inflow of the company. Sensitivityanalysis is used by the companies to identify and evaluate the best project into the available projects. (Moles, Parrino & Kidwekk, 2011In concern of capital budgeting, it has been found that the sensitivity analysis offers an analysis over various variable factors and aspects such as cost, sales, investment plans, interest on loan, present value factor, present value etc. it has been observed that in sensitivityanalysis, present value factor must be calculated according to the various assumption which istaken for evaluating the factors which could affect the condition of the company and investment project. Such as if an organization is required to earn $ 10,00,000, $ 20,00,000 and $ 30,00,000 in next 3 years (Peterson, & Fabozzi, 2002). And for it, he invest into a project where the internal rate of return is expected 10% than the investor must invest $ 60,00,000 so that the entire expenses could be get back by the company in given time period.further, it has been analyzed that the if IRR rate is changed in this case than the entire

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