Corparate finance Essay Example | Topics and Well Written Essays - 2500 words - 1

Corparate finance - Essay ExampleIn the case of Hoad limited the detonating device investment is the resources needed to acquire new and replace old production equipment. Organizations should come up with efficient capital investment plans for how the budget should be allocated and how the funding will be acquired.An organization weed obtain funds through two approaches namely equity and debt. Equity investments refer to a situation where the go with offers ownership to investors or uses retained earnings to finance projects (Dow, 2009 p.91). In the case of Hoad limited, the retained earnings and issuing of more memory wont be adequate to fund their intended capital expenditure. The other option that is viable to Hoad limited is the use of debts. Debt financing involves acquiring investors who receive a promise of succeeding(a) payments without acquiring ownership of the organization (Dow, 2009 p.91).Deciding on the best funding approach is relevant for Hoad Limited given that investment is a crucial office for organizations. Though markets may be the preferred mode of financing in developed countries for organizations, establishing an alternative finance option is critical in regions with underdeveloped stock exchange (Allen, Carletti, Qian, & Valenzuela, 2012 4). In regions with under-developed stock exchange, a well-established system is crucial in exploiting the gains from trade. These opportunities ought to be matched with relevant funding based on the standard and non-standard sources and also domesticated and international sectors.Before Hoad limited decides on the best approach to adopt in acquiring debts to finance the capital expenditure, the organization has to evaluate its capital organize and determine the best way forward. The business has to decide whether to use more equity or more debt in its capital structure (Dow, 2009 p.95). The company can increase its expected returns when the return from a capital investment is greater than the c ost of