Why might companies disregard a positive NPV? MIT professor of financial economics Stewart C. Myers asserts that different decision rules might apply when investments are long-term rather than short-term (Myers, 1977). Financial managers may rationalize that it is in their immediate interest to invest in short-term projects because they bring the most shareholder benefits; this is, in other words, the so-called agency problem. However, what could be the long-term consequences of that strategy?
Identify and describe a long-term investment project (either real or fictional) that would likely require significant capital commitment. If you were acting as a financial analyst, what factors would you consider in the decision to move forward or abandon the project? In your initial response, discuss such factors as:
- NPV
- IRR
- EBIT
- WACC
- Corporate structure
- Market structure
- Corporate goals and mission
Regardless of these factors, why might this project still be a worthy investment? Are there certain industries that might demand a more long-term strategy? Which ones? I
Reference Myers, S. C. (1977). Determinants of corporate borrowing.
Journal of Financial Economics, 5(2), 147–175.
To complete this assignment, review the
Discussion Rubric
document.
Organizational Analysis & Design Plan: Project Description and Scoring Guide Discussion Rubric: Graduate Your active participation in the discussion forums is essential to your overall success this term. Discussion questions are designed to help you make meaningful connections between the course content and the larger concepts and goals of the course. These discussions offer you the opportunity to express your own thoughts, ask questions for clarification, and gain insight from your classmates’ responses and instructor’s guidance. Requirements for Discussion Board Assignments Students are required to post one initial post and to follow up with at least two response posts for each discussion board assignment. For your initial post (1), you must do the following: Compose a post of one to two paragraphs. In Module One, complete the initial post by Thursday at 11:59 p.m. Eastern Time. In Modules Two through Ten, complete the initial post by Thursday at 11:59 p.m. of your local time zone. Take into consideration material such as course content and other discussion boards from the current module and previous modules, when appropriate. Reference scholarly or peer-reviewed sources to support your discussion points, as appropriate (using proper citation methods for your discipline). For your response posts (2), you must do the following: Reply to at least two different classmates outside of your own initial post thread. In Module One, complete the two response posts by Sunday at 11:59 p.m. Eastern Time. In Modules Two through Ten, complete the response posts by Sunday at 11:59 p.m. of your local time zone. Demonstrate more depth and thought than simply stating “I agree” or “You are wrong.” Guidance is provided for you in each discussion prompt. Critical Elements Exemplary Proficient Needs Improvement Not Evident Value Comprehension Develops an initial post with an organized, clear point of view or idea using rich and significant detail (100%) Develops an initial post with a point of view or idea using appropriate detail (90%) Develops an initial post with a point of view or idea but with some gaps in organization and detail (70%) Does not develop an initial post with an organized point of view or idea (0%) 20 Timeliness Submits initial post on time (100%) Submits initial post one day late (70%) Submits initial post two or more days late (0%) 10 Engagement Provides relevant and meaningful response posts with clarifying explanation and detail (100%) Provides relevant response posts with some explanation and detail (90%) Provides somewhat relevant response posts with some explanation and detail (70%) Provides response posts that are generic with little explanation or detail (0%) 20 Critical Thinking Draws insightful conclusions that are thoroughly defended with evidence and examples (100%) Draws informed conclusions that are justified with evidence (90%) Draws logical conclusions (70%) Does not draw logical conclusions (0%) 30 Writing (Mechanics) Initial post and responses are easily understood, clear, and concise using proper citation methods where applicable with no errors in citations (100%) Initial post and responses are easily understood using proper citation methods where applicable with few errors in citations (90%) Initial post and responses are understandable using proper citation methods where applicable with a number of errors in citations (70%) Initial post and responses are not understandable and do not use proper citation methods where applicable (0%) 20 Total 100%