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Financial Analysis - Maximize Firm Value

After taking a closer look at the numbers and doing the financial analysis, you begin to think more strategically, and in a broader context, you anticipate what the CFO would ask or what the head of Strategic Planning might want to know. You think about some of the key issues:

- Does this project maximize firm value?

- What will be the impact to the stock price?

- How does this capital project fit with the strategic direction of the firm?

In light of this, you decide to email the CFO and VP of Strategic Planning in anticipation of their questions.

Explain how capital projects maximize firm value. Explain how major capital projects can impact a firm's stock market valuation and how they should fit with the strategic direction of the organization.

Solution Preview

The response addresses the queries posted in 1072 words with references.

//Capital projects are substantial for the firm as they involve the precious resources of the firm in a large amount and have the potential to affect the firm's profitability. This paper will enclose a brief introduction of capital projects and will also elucidate the nature of capital projects, and their favorability. The below part of the paper will illustrate that how capital projects maximizes firm value.//

Capital Projects Maximize Firm Value

Capital projects are generally long term projects for the construction of a new building, acquisition of land or property or for acquiring equipment. These projects comprise of massive investments and involve a large number of resources of the investors. Hence, capital projects are crucial for the firm. Capital projects maximize a firm's value in several ways. Such projects are valuable for the firm because they increase the value of the firm in terms of its stock market valuation. Capital projects if achieved, their desired results maximize the firm's goodwill in an enormous manner, which in turn maximizes firm's value. Capital projects are also valuable for the firm as they provide a strong platform to firms regarding their future perspectives (Baker & Powell, 2009).

As capital projects increases the goodwill and stock market valuation of the firm, firms can utilize all these to achieve their future objectives and grow successfully. Successful capital projects bring huge profits for the firm, which helps the firm to acquire necessary physical and financial resources. Since, capital projects are so much valuable for the firm and maximizes its value in numerous manner, it s necessary that these projects should be designed and implemented efficiently. Although capital ...

Solution Summary

The response addresses the queries posted in 676 words with references. Capital projects are substantial for the firm as they involve the precious resources of the firm in a large amount and have the potential to affect the firm's profitability. This paper will enclose a brief introduction of capital projects and will also elucidate the nature of capital projects, and their favorability. The below part of the paper will illustrate that how capital projects maximizes firm value.

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