Flash Memory, Inc. - Group 8.docx
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Transcript of Flash Memory, Inc. - Group 8.docx
New Heritage Doll Company
Financial Management
Group 8
Hathaway Browne is the CFO of Flash Memory, Inc., and needs to plan to finance both existing product lines and all other new investments approved by the board.
An investment opportunity to develop a new product line came up recently.
There were evaluated three alternatives
Option 1 - Loan Bank Option 2 - Invest in New Product Option 3 - Invest in New Product sailing 300,000 shares
The spreadsheet shows the calculation of each one:
Return on equity 2010 2011 2012Option 1 - Loan Bank 14.7% 14.7% 12.4%Option 2 - Invest in New Product 14.7% 18.7% 16.5%Option 3 - Invest in New Product sailing 300,000 shares 11.7% 16.2% 14.8%
After evaluate the three alternatives the best one is to invest in new product (Option 2) since it will provide the best ROE in the following years for the company.
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