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Wyndham Worldwide Case Study

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Wyndham Worldwide Case Study
“Capital budgeting is the process in which a business determines and evaluates potential expenses or investments that are large in nature. These expenditures and investments include projects such as building a new plant or investing in a long-term venture. Often times, a prospective project's lifetime cash inflows and outflows are assessed in order to determine whether the potential returns generated meet a sufficient target.” (Investopedia) The utilization of capital budgeting allows a company to determine the investment that will best increase shareholder value. With limited funds to invest in projects, Wyndham Worldwide must determine where best to invest. Considering the constraints of the project, an after-tax cash flow analysis is employed …show more content…
It can be a slow process to grow the capital needed, not currently an issue for Wyndham Worldwide. It also includes the fact that a business requires cash to fund ongoing operations. Devoting too many resources to grow can starve the company of “the cash it needs to be healthy right now.” (Decker) Insomuch as taking on outside investors mean giving up some control, by not taking on outside investors you lose the experience and insight that new investors can bring to the table. Taking into consideration that Wyndham Worldwide has been steadily growing since its inception in 1981, and that this acquisition is not necessary for quick expansion, operations may be the viable solution for the raising of the necessary …show more content…
This structure was fairly steady over the last few years, indicating that taking on additional short-term debt may not be the best of options. Wyndham Worldwide is not a company in need of quick cash to expand, nor would the utilization of cash on hand deplete the cash flow necessary for the operations of Wyndham Worldwide. At the low end, if the loan were 8% interest, for the necessary funds, Wyndham Worldwide would be paying $11,856,000 in interest. This method, while it has its time and place in every business, would not be the recommended option to raise the funds necessary for the
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