Finance Report: Expansion Project and Shareholder Conflict

This finance assignment analyzes a case study involving a company's expansion project. The report examines the conflicts between the CEO, General Manager, and shareholders regarding the project's funding and feasibility. The General Manager's decision to pursue a solar panel manufacturing project, requiring significant capital investment, is contrasted with the potentially more conservative option of LED bulb manufacturing. The analysis explores the CEO's role in the decision-making process, highlighting the importance of due diligence and market analysis. The report discusses the financial implications of the decisions, including the potential for a financial crisis and the impact on shareholder value. It also considers the importance of aligning managerial decisions with shareholder interests and market conditions to ensure successful project outcomes. The assignment emphasizes the importance of strategic financial planning and risk assessment in business expansion endeavors.

Running head: FINANCE
FINANCE
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................3
Sub part 1:..............................................................................................................................3
Sub part 2:..............................................................................................................................3
Sub part 3:..............................................................................................................................4
Sub part 4:..............................................................................................................................4
References and bibliography:.....................................................................................................5

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Answer to question 1:
Note: Please explore the excel file for detailed calculations.

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Answer to question 2:
In the given case study, the CEO of the company wanted to grow up their business
with some new expansion projects and the General Manager suggested the manufacturing of
the solar panels as the new expansion project over the manufacturing of the LED bulb as he
thought it would be more profitable. It requires a huge amount of capital investments and the
market was in downturn. In this context, following questions can be answered.
Sub part 1:
The CEO and the General Manager of the company was feeling the urge to expand
the business as the company was performing well financially and operationally. The company
was having a dividend payout rate of 12% to 15% and the mangers of the company thought
that they would be able to finance the expansion project from their own surplus funds.
Shareholders are the owners of the company and they are interested in maximum return and
wealth maximization of the company. As the market was passing through a downturn they
were unable to borrow fund from the market and their surplus fund fell short to met the
requirement of capital investment of the expansion project and it lead to a financial crisis and
shut down of the company. In the above case, the main conflict between the manger and the
shareholders of the company was in funding the projects, if it would have been possible to
fund the project by borrowed capital then, no such conflict would have been arisen with them
(Muda and Hasibuan 2018).
Sub part 2:
The act of the general manager was an error, as the market was in downturn he must
have known that there would be serious issues in raising capital or borrowing funds from the
market to finance the expansion project. There was two options to the general manager, one
is the manufacturing of the LED bulb and the other is the Manufacturing of the Solar panel,

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the Manufacturing of the solar panel requires more capital investment than the manufacturing
of the LED bulb. Therefore, if the manager would have gone for the manufacturing of the
LED bulb then, the company could have been succeeded in the expansion project and
managed to grow their business as it was expected by the CEO.
Sub part 3:
The CEO of the company felt the good financial health and position of the company
and hence proposed an expansion project. CEO’s decision about the expansion of the
business was right but he should not have fully relied on the general manager. He should
have analyzed and checked the feasibility of the expansion projected proposed by the general
manager. In this point, the CEO went wrong, if it could have been taken care of with
professional practices, then the company could have made a profit successfully from the
expansion project (Harrison and Lock 2017).
Sub part 4:
The CEO should have analyzed the proposal of the general manager in accordance
with the future prospects, availability of fund and the market condition and he should have
proceeded with the proposal of the general manager only if there was a feasibility of the
proposed project. This act of the CEO could have given a better result to the company
(Bocken et al. 2016).

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References and bibliography:
Bocken, N.M., De Pauw, I., Bakker, C. and van der Grinten, B., 2016. Product design and
business model strategies for a circular economy. Journal of Industrial and Production
Engineering, 33(5), pp.308-320.
Harrison, F. and Lock, D., 2017. Advanced project management: a structured approach.
Routledge.
Johansson, P.O. and Kriström, B., 2015. Cost-benefit analysis for project appraisal.
Cambridge University Press.
Muda, I. and Hasibuan, A.N., 2018. Public Discovery of the Concept of Time Value of
Money with Economic Value of Time. In Proceedings of MICoMS 2017 (pp. 251-257).
Emerald Publishing Limited.