Capital investment
By Day 5
Respond to two or more of your colleagues’ posts in one or more of the following ways: (100 words or more each Colleague)
- Ask a question about the capital investment your colleague identified.
- Provide an additional question that your colleague might ask about the company’s financial position before engaging in the investment, including a rationale for why they might ask it. Or, expand further on one of the questions they identified.
- Share an insight you gained from or offer an alternative perspective on your colleague’s proposal of whether the capital investment would or would not be of value to their organization at this time.
Return to this Discussion in a few days to read the responses to your initial posting. Note what you have learned or any insights you have gained as a result of the comments your colleagues made.
1st Colleague to respond to:
Hello, class. In week 6, I wrote about JP Morgan Chase during our discussion. Chase has many investments within its operations that align with social responsibility. These capital investments lead to specific growth internally and externally. This week I will talk about the investment of rebuilding communities, from home ownership and small businesses, driving up economic opportunities, and financial coaching & counseling.
The company wants to invest in the community, helping to bridge gaps and bringing economic growth and change. The cost for this includes a $125 million investment within the communities. The goal is to teach under-served communities how to:
- Build Credit
- Increase Savings
- Reduce Debt
- Meeting Mid- and Long-Term Goals
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The other part of this would be to teach customers the importance of:
- Savings
- Chase Secure Banking
- Credit Journey
- Branch locations
A project would be having homeowner ship classes for underserved communities. This will pour knowledge into communities and strengthen economic factors to promote financial growth and stability.
A few questions that may be asked may be the following:
- What are the program’s parameters, qualifications, funding options, and discount opportunities?
- Who would be eligible to participate in the program?
- Are there any hidden fees?
- How will the bank have earning potential from this program?
- Will a specific area of communities be eligible, i.e., zip code, proof of address?
These questions, of course, will be fine-tuned; however, these are questions that will be addressed to ensure the program remains fair and equitable.
The time value of money is the sum of money work more now than on a future date due to its earning potential. In this situation, the Time Value of Money (TVM) helps to guide investment decisions for this project. The value of money can change and can cause the rise of inflation for goods and services. Understanding how you calculate TVM and pinpointing investment opportunities will help a leader to make sound decisions.
Reference:
Brigham E. F., & Houston, J. F. (2022). Time value of money. In Fundamentals of financial management (16th ed., pp. 151–185). Cengage Learning.
2nd Colleague to Respond to:
When it comes to capital investments, businesses make important decisions. As with hospitals, developing and implementing capital investment strategies is no different. It is possible, for example, to improve the accuracy and precision of urine results in private medical practice by using urine analyzers. The use of urodynamic equipment, on the other hand, could allow patients to diagnose urinary symptoms without being referred to a urologist. Capital budgeting methods should be used when choosing between these two types of medical equipment for long-term growth (e.g., NPV, payback, or IRR). Suppose I bought $50,000 worth of urodynamics equipment today, achieved the expected revenue, and didn’t exceed the projected budget so that I would get $10,000 today. Investing in urodynamics equipment is a worthwhile investment, based on these results. Alternatively, if the NPV is negative, the expected earnings are less than the projected costs, which is a sign that the project is likely to be loss-making (Brigham & Houston, 2022 ). A hospital’s sponsorship may determine the procedure. As part of the hospital development plan, regional governments could provide grants to support hospital owners’ investments.
To make this type of investment, I will seek the answers to the following inquiries about a thorough understanding of the company’s financial standing is essential before making any investment as a manager. To accomplish this, it is necessary to have a comprehensive understanding of the organization’s operations, finances, and financial obligations. Also, it is crucial to understand the company’s credit rating and funding capabilities. Furthermore, I would like to know more about the project, such as its expected return on investment and risks. This is because to evaluate the project appropriately, as a manager, I would need a clear understanding of the potential risks and benefits (Brigham & Houston, 2022).
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Capital investment would be highly beneficial to the organization since it would enable it to expand its operations and generate more revenue. This project will also boost profitability and positively impact the company’s bottom line. Although the time value of money concept suggests that the project would be valuable to the organization at this point, a decision must be made after weighing the risks and rewards of the project. The principle of the time value of money asserts that money is worth more during a specific period than it will be later. It may soon be possible to take advantage of a window of opportunity. As long as money can be invested, it can produce returns over time. Using the time value of money, businesses can determine how much capital to invest based on the relative value of different projects. The value of projects that are expected to generate higher returns is higher than the value of those that are anticipated to generate lower returns. The time value of money is based on the belief that money has a time value, and the sooner an organization receives it, the more valuable it will be (Brigham & Houston, 2022). As a result of such capital investment, the organization may receive the money earlier, increasing its value.
References
Brigham, E. F., & Houston, J. F. (2022). Time value of money. In Fundamentals of financial management (16th ed., pp. 151–590). Cengage Learning.
Capital investment
