Investment – Economics

Contesta las siguientes preguntas: 1. What is finance? Explain how this field affects the lives of everyone and every organization. Finance can be define as the art of science of managing money. Virtually all individuals and organizations earned or raised money and spend or invest money. Finance is concern with the process, institutions markets, and instruments involved in the transfer of money among individuals, businesses and goverments. This field affects the lives of everyone and every organization in the event of making purchases or sales transactions, borrowing money and saving money or investing to achieve financial goals.

As far as organizations the area were finance affects their business in a positive way is offering them financial services, managerial financial and others. 2. Describe the field of managerial finance. Why is the study of managerial finance important regardless of the specific area of responsibility one has within the business firm? The field of managerial finance is concerned with the duties of the financial manager in the business firm.

They perform such varied financial task as planning, extending credit to customers, evaluating proposed large expeditures, and raising money to fund the firms operations. It affairs from any type of business whether financial or non financial, private or public, large or small, profit seeking or non profit. Resuelve el siguiente problema sobre analisis marginal: The managerial finance function and economic value added (EVA). Ken Allen, capital budgeting analyst for Bally Gears, Inc. , has been asked to evaluate a proposal.

The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $560,000 (in today’s dollars) over the next 5 years.

The existing robotics would produce benefits of $400,000 (also in today’s dollars) over that same time period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Show how Ken will apply marginal analysis techniques to determine the following: a. The marginal (added) benefits of the proposal new robotics. 160,000 (560,000 new robotics – 400,00 less benefit existing) b. The marginal (added) cost of the proposed new robotics. 150,000 (220,000 initial cash investment – 70,000 less sale old robotics).

c. The net benefit of the proposed new robotics. 10,000 (160,000 marginal added cost -150,000 less marginal added cost) d. What should Ken Allen recommend that the company do? Why? Ken Allen should recommend the substitution of the old robotic due to EVA is a positive aquiasition and it will increment the benefits. e. What factors besides the costs and benefits should be considered before the final decision is made? The factors that need to be consider before the financial decision is made are the time, the cash flow and the risk the stockholders will encounter.