Discuss how diversification in an investment helps in reducing the risk associated with the investment.

Discuss how diversification in an investment helps in reducing the risk associated with the investment.

Imagine that you are the CEO of a multinational corporation (some examples are provided below). The company has excess cash on hand and is seeking to invest it. In a 1500-word essay, analyze your options globally and come up with a strategy to put the company’s $500 million idle cash fund to use. Cite a minimum of three external resources to support the content of your analysis. Use the current APA style guide to format your assignment.

Cover the following concepts in your analysis:

• Risk and return associated with the investment
• Your discussion should focus on the following risks: project-specific risk, industry-specific risk, competitive risk, international risk, and market risk
• Discuss how diversification in an investment helps in reducing the risk associated with the investment
• Use different models like CAPM, APM, etc., to conduct an analysis of risk vs return
• Valuation methods used to choose the best investment option
• Your discussion should focus on cost approach, market approach and discounted cash flow approach.
• Use examples and comparative analysis to support your discussion
• A detailed financial plan for the multinational corporation
• Here you will discuss how you will create a detailed financial plan for the selected organization. Make sure to consider various barriers associated with capital flows.
• The multinational financial management process includes cash management, inventory and accounts receivable management, financing and capital expenditures.
• Consider the factors affecting International Portfolio Investment
• Cost of capital associated with the corporation based on the current capital structure
• In this section include cost of capital computations associated with the selected organization.
• Discuss each component used in the cost of capital formula
• Discuss challenges associated with cost of capital computations
• Capital budgeting and capital structure decisions

Company Selection

You can choose any one of the following MNC’s or you can select a company of your own choice:

• Pepsi Co.
• Tata Consultancy Services
• Microsoft
• IBM
• The Coca-Cola Company

Resources :

Recommended resources for your analysis are:

• Yahoo! Finance
• Chron: The Capital Structure for a Multinational Corporation
• Harvard Business Review: A Refresher on Cost of Capital