Finance For International Business Essay Example | Topics and Well Written Essays - 2500 words

Finance For International Business - Essay Example The article presents the financing and the methods of capital budgeting. Capital budgeting is defined as the planning process which is applied by the managers of the company to decide whether the long-term investments are worth the supplying/funding of money through the capitalization structure of the company. Fenland Foods Plc should opt for debt financing method if it considers investing in the project in spite of the negative results of the Fresh Farm because it does not require sharing the company’s part with the investor. Financing through bank loan will be the better option because raising a loan through the bank will give the freedom to Fenland to run the Fresh Farm Foods Company without any intrusion from the lender. By opting for the bank loan, Fenland could also enjoy the tax benefits as the interest paid on loans are generally deducted from the income before computing the taxable income. The capital asset pricing model provides a practical risk measure that helps the investors to resolve what return they actually deserve for placing their money or capital at risk. It is recommended that Fenland Foods Plc should not undertake the project as the NPV of Fresh Farm Foods is negative and also the payback period is more than five years which signifies that Fenland will not be a ble to quickly pay the finances. It is also advised that if Fenland considers undertaking this project in spite of its negative result then they may invest  £400,000 which is less than the initial investment.