Cost of Capital

Topics: Finance, Investment, Capital structure Pages: 1 (282 words) Published: September 3, 2014
Video Concept: Cost of Capital
Pfizer is the worlds’ largest research based pharmaceutical company. This company faces many challenges are many challenges just as other major companies do. This company has an estimated $65 billion in world -wide revenue with market cap of $140 billion. The assumption is that the company has a solid financial portfolio, trading 8 billion shares daily, and retaining $7 billion in capital. The company does not fund project by project, it prioritizes the present products to determine which to fund first using a productivity index metric to measure the cost to manufacture the anticipated return on investment. As stated by Emmitt, each product bears unique risks. The patent process protects the company and allows the company to sell the product exclusively on the market. Team B will reflect on some of the corporate finance challenges faced by Pfizer. Emmitt states that while Pfizer goes through many financial challenges the number one challenge in regards to corporate finance for Pfizer is the business environment at Pfizer is constantly changing. While you may have enough capital to pay for debt at one time you may not in the next quarter because of the ever changing environment at Pfizer. Another challenge linked to the changing environment Emmitt states is what the optimal capital structure is for a company such as Pfizer. Cash or liquidity is the two big things Emmitt says to keep in mind when dealing with a risky business like pharmaceuticals. Pfizer is also no different than most companies as they are always trying to minimize tax cost.

Reference
Parrino, R. (2012). Fundamentals of Corporate Finance, Video Concept: “Cost of Capital” located in WileyPLUS Assignment Week 5 (2nd ed.). Hoboken, NJ: John Wiley & Sons.
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