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1. Malek Qandil
Nov 30, 2019Nov 30 at 2:27pm
This capital budgeting decision is extremely important for the organization. Implementing the new process into my organization T-mobile has helped drive sales for the front line. Which in turn helps grow revenue for the organization. Even though we are using ten percent of last year’s profits, it is well invested. Especially when investing into the assets of our own organization. The rate of return can be unimaginable when thinking about how much revenue we may be able to get back with the new computer network system. More customers are going to be taken care of at a faster rate. Which in turn gives them a better customer experience. At the same time, the organization is going to help drive the word of mouth into the organization by focusing on the customer experience. The more customers that have a better experience with my organization the more that they are willing to go and tell their friends and family and with this investment not only will it help in that area, but it will able to help assist the customers to a faster experience. “A pie is a good analogy: A firm's capital budgeting determines the size of the pie, and capital structure determines who gets the pieces of the pie” (Byrd, 2013, 9.1). Understanding what departments are utilizing the profits and how they are being stored is a huge part of capital budgeting.
Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial Finance [Electronic version]. Retrieved from https://content.ashford.edu/
2. Deborah Devault
MondayDec 2 at 5:07pm
Kellogg’s revenue for the year ending September 30, 2019, was $13.672B, the cost of the computer network system will cost $1.367B to decrease the time between customer order and delivery. Important factors to consider when making a capital budgeting decision is how does the decision increase the wealth of a shareholder and does it help to control costs. With the enhancement of the network, we will see a decrease in the time between customer orders and deliveries. Having products on the shelves for customers to purchase will increase revenues because if the products are not on the shelves then consumers will purchase from the competition. The concept of not having products sitting in a warehouse and being able to manage the freshness of products is an additional benefit for the new software. What if the products could eliminate preservatives and be healthier for the consumer.
There are four different calculation methods to be used when evaluating capital investment projects they are; net present value, internal rate of return, payback method, and profitability index. As we have learned earlier that an investment should not have a negative NPV, or your shareholders are unlikely to support your project. Finding the balance between debt ratios is part of the “financial goal of the corporation: Management chooses a specific capital structure in the belief that its choice will maximize the firm’s worth, and ultimately shareholder wealth” (Byrd, 2013).
Kellogg’s beta (5 years) is 0.53, and the money they would need to invest in the new software is $1.367B. Kellogg is a stock that is less volatile than the overall market since the beta is less than 1 (Kellogg Company, 2019). Kellogg will also need to look at the debt they hold because that can have a significant impact on a company’s stock price; we need to unlever the beta to remove these effects.
3. Malek Qandil
Nov 30, 2019Nov 30 at 2:40pm
T-mobile currently does not have a dividend policy. There is a major reason as to why though. T-mobile has been growing in their business and have had a plethora of cash flow in the last couple years, yet the investors that are currently invested into T-mobile do not want a dividend payout. Instead they would like the business to invest into themselves more and more. I think the reason that is, is because they have yet to see a slow in growth into T-mobile. They are always constantly growing year over year, quarter over quarter. So, in reality it is helping them in many different ways. T-mobile has looking into the fact of doing stock buy backs though . Where T-mobile may buy back stocks if needed to help pay out some of the investors. In reality as a T-mobile stock holder i think this is the best option for them. As they are still growing and trying to get on the same level as Verizon or Atnt. They still need to invest their cash flows into assets to help drive more and more revenue. They may be a huge organization, but they still do not compare with Verizon on how many subscribers they have. The policy that they have affects the capital market because in the future they can implement the process of dividend process which could in turn take a toll on their cash flows, but make investors happy that they have invested so much into them.
4. Malia Tanaka
TuesdayDec 3 at 10:55pm
Under the Shareholder Information section of Starbucks' 2018 Annual Report, they state that Starbucks is traded on NASDAQ under the abbreviation SBUX (Starbucks Corporation, 2019). Starbucks recorded 18,100 shareholders as of November 9, 2018. As quoted by Starbucks Corporation (2019), "Future decisions to pay cash dividends continue to be at the discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Board of Directors considers relevant." (p. 19).
Starbucks is a massive company that leaves the decision of paying out dividends to its Board of Directors. For all intents and purposes, I think that Starbucks chose the dividend policy they have in place to ensure the financial security and prolonged growth of the company. For a company of their scale and scope, I do believe that they have a great dividend policy for their company.
As defined by Kenton (2019), "An imperfect market is one in which individual buyers and sellers can influence prices and production, where there is no full disclosure of information about products and prices, and where there are high barriers to entry or exit in the market." (para 2). A perfect market has unlimited buyers and sellers in perfect equilibrium. In an imperfect market, Starbucks' dividend policy would do well because the board of directors makes the decision to pay dividends based upon performance and finances. They pay out based upon how the company is doing and reserve the right of when to pay out and how much.
Starbucks dividend rate over the past five years was $0.26 in 2014 to $0.41 in 2019. It has changed over the past five years. I think one reason could be the management is prioritizing dividends payouts.
