Optimal financing and investment strategy for your scenario
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I need help on this assignment. I have to answers the following questions based on a chosen scenario. The selected scenario is: A manufacturing organization considering expansion to India or Brazil
Prepare a proposal in which you select the optimal financing and investment strategy for your scenario.
The selected scenario is: A manufacturing organization considering expansion to India or Brazil
Conduct a sensitivity analysis, based on the following questions:
1. What if funds are blocked? How does this affect the parent organization?
2. What if the subsidiary provided funds?
3. How does the source of capital affect the subsidiary and parent organization?
4. What sources of capital would minimize the cost of capital to the subsidiary?
Please properly cite your references. Thanks.
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Solution Summary
The solution examines optimal financing and investment strategy for a scenario. The business examined is a manufacturing organization considering expansion to India or Brazil.
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Business: A manufacturing organization considering expansion to India or Brazil
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About Us
We are a manufacturing firm and looking forward to expand in India or Brazil. This expansion plan is mainly for our diversification strategy. We are looking forward to diversify our market in the emerging markets like India and Brazil. We chose India because of it is the fastest emerging economy of the world and we find a great market in this country. As far as Brazil is concerned the country is the emerging economy in the North America and hence it provides a god market for us.
Capital Requirements
To operate a manufacturing business in India or Brazil requires an amount of $500 million in order to purchase the basic requirements like land building machinery. Also capital is required to finance the current asset for the company. There are various ways to finance the required capital. These ways are, borrow the amount from Asian Development Bank, get the required capital from the subsidiary, or raise the capital from the market. Raising capital from Asian development bank can be done if the company is looking forward to expand its manufacturing business in India but if it is going to expand its business in Brazil it will have to find appropriate bank to finance its capital. Getting capital from subsidiary has a higher cost, similar to ...
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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