Any financial experts?

[Westat1]

Hi

Not sure if this is the area to post it, but I have several "generic" financial questions and would greatly appreciate your help

Thanks,

[Nick_W]

Maybe you should ask them then? ;-)

Nick

[cfx211]

If they are generic and somehow involve doing business on the internet then why don't you post them and see if anyone can answer them.

[Westat1]

Cool cool, here are 2

In your own words, define the term "cost of capital." Why do we use the cost of capital to evaluate investment alternatives? Would you question discounting these cash flows by the firm's cost of capital of 12%? Would you recommend a higher or lower rate & why?

What is the payback period for this initiative? Would you accept or reject this project based on the payback period. Why or why not? What other considerations (or information) would affect your decision

Thanks for the help

[cfx211]

Shouldn't your textbook contain the answer to this question?

Sorry but this is an academic question and it contains references to a project we know nothing about. While somone may want to do your homework, this looks like it falls outside the realm of this forum which deals more with the practical application of ecommerce.

[rogerd]

Westat, this does sound more like homework than an actual business case. If this is a real issue facing your business, try putting a little meat on the theoretical bones so we can comment effectively.

[Westat1]

Thanks, I am still getting used to what is generic and what is specific. Isn't defining what is meant by cost of capital and why is it used generic?

Also, how would you "decide" if a payback period is good or not?

[rogerd]

Maybe a bit TOO generic... it isn't clear that this post is on-topic or relevant. Note that "cost of capital" tends to be more of a B-school concept than something practiced in the real world. I've seen companies go through periods where they wouldn't approve a project with longer than 6 months payback. This had nothing to do with the cost of capital, and much more to do with the company's desire to maximize its cash position at that moment in time.