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
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
- The Coca-Cola Company
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