University of Phoenix
FIN 571/December 10, 2012
In week one, the author conducted an analysis on the Guillermo Furniture Store location, company finance, and the production of work. For this current week, the author will analysis some alternative for Guillermo Furniture Store working capital policy by implementing multiple valuation techniques with an emphasis on reducing business risks and comparing the average cost of capitol. In early 1990, Guillermo saw a sharp decline in business. This decline has given an opening to foreign competitors to gain influence on business. Competition has made a way for customers to seek out the latest technology in furniture making by creating a low price range. In the simulation, location played an important role with a new international airport, wonderful weather and scenery, and roads that were not heavily congested. As a side note, housing in the area was relatively inexpensive (University Of Phoenix, 2011).
In order for the firm to make a decision that would serve as profitable, alternatives need to be factored into any equation. To do so, the author will categorize the alternative investment projects in their proper order. The first alternative is for the firm to do nothing, not change position and continue the path that has made the firm successful since the 1900’s. The alternative of using high tech custom furniture will give the firm an opportunity to produce at a lower cost. The third alternative is the broker alternative which would allow the firm to merge with another store. The firm realizes that in order to remain competitive, this decision is huge. Along with three courses of action, the firm needs to consider the implementation of a capitol budget. When seeking capital budgeting decisions, the objective is to find investment projects that will add value to the firm. These are projects that are worth more to the firm than they cost or
References: Guillermo Furniture Store Analysis 7Sensitive Analysis. (2011). Investopedia. Retrieved fromhttp://www.investopedia.com/terms/s/senstivityanalysis.aspUniversity of Phoenix. (2012). Guillermo Furniture Store Scenario. Retrieved December 10, 2012 from University of Phoenix, Week four, and FIN/571-Corporate Finance Course website. Weight Average Cost of Capital. (2011). Investopedia. Retrieved fromhttp://www.investopedia.com/terms/w/wacc.asp R. Emery, D. Finnerty, D. Stowe. (2007). Corporate Financial Management (3rded). NewJersey: Pearson-Prentice Hall, Inc.