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Flash

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Submitted By Pintofra
Words 4332
Pages 18
Index
Executive Summary Problem Statement Main Issues The Project Valuation Funding Projections Without Project With Project (Debt Financed) With Project (Equity Financed) Conclusions and Recommendations 2 3 3 3 4 5 6 6 6 7 8

Appendix
Appendix 1 – Project Free Cash Flow and Valuation Appendix 2 – Balance Sheet and Income Statement of Company without Project Appendix 3 – Balance Sheet and Income Statement of Company with Project Financed with Debt Appendix 4 – Balance Sheet and Income Statement of Company with Project Financed with Equity 9 10

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Executive Summary Flash Memory, Inc. is a small firm operating in the computer and electronic device memory market, competing against giants such as Samsung and Intel. This market is, due to its fast growth and continuous technological change, highly competitive, which requires companies to be ever more careful in choosing which projects to pursue and how to finance these projects. In this order of thought, Flash Memory currently holds an investment opportunity and, in case they decide to undertake the project, need to decide on the optimal way of financing it. In order to state if the company should invest in the new project we analyzed what impact the project would have on the company’s value. Following the analyses it is clear that the company should undertake the project regardless the way it is financed, since it is a positive net present value and will, therefore, create value for the company. Besides, the company would be undermining its current level of growth if it didn’t undertake new investment opportunities, since sales for its existing products are slowing down. As for the funding of the project, we analyze 3 sources of funding: internally generated cash flows, bank debt and equity issuance. The first source is almost immediately excluded since we realized it is not even

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