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The decision to make an investment is based on this benchmark. Mostly the companies employ various sources of finance such as equity, preference, debentures, term loans etc. The calculation of WACC is done using the weights of the different components of capital base.
There are varying returns for all the sources. As the equity holders bear the maximum risk, the returns required by them is higher than the other investors. This is mainly because in case of extreme situation like insolvency, the equity shareholders have the last claim on the assets of the company. In such situations preference is given to the lenders of the company. Moreover, the declaration of dividends is not mandatory for the companies. A dividend is declared only if the company has surplus earnings whereas the payment of interest cost is mandatory. The company has to honour its debts irrespective of its profitability. This is the reason that the lenders get a lower return as compared to equity holders. But, if the company is highly leveraged, even the lenders become cautious and demand for higher returns. This is the reason that all the companies try to optimize their capital base for minimizing the cost of capital.
The cost of capital is the minimum return that a company must earn from the business activities to payoff its investors who provide the necessary capital in the form of shares, debentures and loans. Two sets of information are needed for calculating the cost of capital- weights of the various sources of finance and their respective costs.
Many studies have been conducted on the cost of capital which is dependent on the composition of the capital base of the company. The capital structure of a business measures the ability of a company towards meeting the needs of its stakeholders. Modigliani and Miller (1994) highlighted how the value of the firm is not affected by its capital structure as the tax advantage of debt
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It tends to manage its plans and goals in such a way which assist the organisation in the accomplishment of its major business objectives. Considering the significance of the corporate objectives, this paper discusses the concept of the strategy implementation and implications in the Starbucks Coffee.
The company officially operates across UK and Netherlands. Morrisons together with its subsidiaries is engaged in providing a wide variety of products ranging from grocery to gift cards, alcoholic and non-alcoholic beverages, garden furniture and plants.(Wm Morrison Supermarkets plc, 2011).
For instance, the countries also negotiate to reduce trade barriers for mutual benefits. The global economy has recorded tremendous growth primarily because of WTO, NAFTA etc. Business enterprises and consumers benefit from this expansion since new opportunities are created and new products are launched respectively.
However, in order to achieve a balance between the risk and return profile of a firm, it is important that firm must develop and construct strategies which can allow it to generate the kind of value which can balance both the risk and return.( Arnold, 2007), Risk therefore can affect organizations in different manners and as such the overall development of the enterprise wide strategies, making of investment decisions, calculations of hurdle rates as well as the mergers and acquisitions decisions are almost all made based on the firm’s effort to balance its risk and return.
The year of 2007 brought the emergence of global financial crisis, bringing more stressful financial period in the global economy. The Jumeirah Group also faced some economic and financial problems, which directly influenced on the corporate strategy of global expansion and growth.
It changes the functioning of economic systems both at the micro and macro levels. Financialisation operates under three conduits namely changes in the operation and structure of financial markets, changes in economic policy and in the behaviour of non-financial corporations (Palley 2007).
PwC currently, operates in over 158 countries employing over 169,000 persons. PwC PricewaterhouseCoopers International Limited (PwCIL) is an umbrella name under which different firms operate as a separate legal entity using brand name PwC. The paper attempts to examine the role strategic resources and capabilities play in the success or failure of PwC.
Understanding the process by which existing business/companies become obsolete and new business/companies evolve is what we are likely to discuss so that we can decide in which direction companies may change strategically to grow and