BUS 295 Lecture Notes - Lecture 23: Preferred Stock, Markets Now, Retained Earnings
Document Summary
Managers may have an opportunity to modify the project to exploit events that happen: contingency planning. Possible future investments that may result from an investment under consideration. Now consider two managerial options: option to abandon. If things aren"t going well after the first semester (the bad scenario), you can shut down after the first semester and stop your losses: option to expand. If things are doing great after the first semester (the good scenario), you can spendan extra to increase capacity, and sell an extra dollars worth for the last two semesters. So now we know how to estimate cash flows and we know how to evaluate them using various criteria, including npv. He"s managed to save up ,000 and he"s deciding between two scenarios: starting his own restaurant (maybe kyoto"s joes). He"s done pro-formas for kyoto"s joes and estimated the cash flows. Understanding the cost of capital: businesses raise money from investors.
