Company Financing and Capital Budgeting

Running head: REPORT 0
FINANCE
SEPTEMBER 9, 2019
STUDENT DETAILS:

QUESTIONS 1
Contents
Part A: Company Financing........................................................................................ 2
Answer 1:................................................................................................................ 2
Answer 2:................................................................................................................ 2
Answer 3:................................................................................................................ 3
Answer 4:................................................................................................................ 4
Answer 5:................................................................................................................ 5
Answer 6:................................................................................................................ 5
Answer 7:................................................................................................................ 6
Part B: Capital Budgeting........................................................................................... 7
Answer 1: Calculation of free cash flow...................................................................7
Answer 2: calculation of NPV-.................................................................................8
Answer 3: Discounted payback period..................................................................10
Answer 4:.............................................................................................................. 11
Answer 5:.............................................................................................................. 11
Part C: Personal reflection........................................................................................ 12
References............................................................................................................... 13

QUESTIONS 2
Part A: Company Financing
Answer 1:
The cash conversion cycle assesses the lag between while the corporations have to
pay the dealers as well as while they received payment by the customer. The cash
conversion cycle was 11.23 days at the legendarily efficient Wal-Mart (Annual
report, 2013a). It is analysed that in 2013, the cash conversion cycle
was negative 28.65 days in case of Amazon. The negative 28.65 days signifies the
average that Amazon received in cash from their customer was 28.65 days prior to
payment to the supplier (Sari and Kahraman, 2015).
In this way, the cash conversion cycle is considered as the measure of working
capital competence. The negative Cash Conversion Cycle states that the company
firm is receiving payment by the customer long before they ever give the supplier.
It is clear that the negative cash conversion cycle is considered as the ignored part
of the plan of international dominion of Amazon. Therefore, the operating working
capital as well as financial cycle along with the relationship to shareholder values is
very important for Amazon. This concept is very significant to understand the
impressive progress of Amazon as well as the total purchasing of food (Annual
report, 2013b).
Answer 2:
When the sale increased, in that case the negative cycle can be helpful for the
organisation to funding the investment for upcoming revenue development, in the

QUESTIONS 3
positive feedbacks sphere that needs Amazon to developing continuously. Harvard
Business Review article from 2013 states a fact that so called negative working
capital was the stronger driver of the development of Amazon. The negative cash
conversion cycle is unseen part of global plan of the company. This is the worthy
cycle however not without risks: new marketplaces as well as the products produce
cash (however not essentially profit), allowing the company to expand its
operations. On condition that the revenues continue to rise, the liquidity is not the
issue, differently from all the organisations that pursue the quick expansion
approach (Chao, 2019).
Answer 3:
If Amazon could not utilise cash for financing the new projects, then there are some
financing options are available. These financing options can be the retain earning as
well as equity capital. The corporation exists for making the profits by selling the
products or services for more than this cost to create. It is fundamental source of
funding for the corporation as well as a process that considers most of money, and
it is the retained earnings. The retained earning can be useful to reward the
stakeholders in the dividend payment’s form or in the form of share buyback,
however are also utilised for investing in the project as well as develop the
business. In this way, financing the development by the retained earnings may be
very useful approach for certain businesses. This does not add to the debt profile
and sap the profit with payment of interest. The conservative option permits the
corporation to keep the control over business in place of complicating scene with
creditor, partner, as well as outside investor. Additionally, including the outsider in
the company, whether as partner, lender, or angel investor, provides the level of