Finance Project of Smith and Caughey’s †MyAssignmenthelp.com

Question: Discuss about the Finance Project of Smith and Caugheys. Answer: Opportunities and threats: The following are the major opportunities that Smith and Caugheys could experience through the purchase of a new building for improving its business operations: Continuation of investment in research and development: As Smith and Caugheys is a technology-based firm in New Zealand, it needs to engage in continual innovation for sustaining in the market. This would enable the organisation to enhance its current technologies for offering something new to the present customers along with attracting new ones (Bocken et al., 2013). This would help in increasing the overall revenue base and in turn, gross income of the organisation. However, the internal rate of return would be minimised slightly due to the rise in initial outlay. Strategic acquisitions: With the help of this new project, Smith and Caugheys could make considerable investment in strategic acquisitions for improving its overall processes (Hamilton Webster, 2015).In order to find greater technological access along with saving money and time for building technology, it could search to acquire organisations that could offer benefits to them. In this case, no effect would fall on the gross income of the organisation; however, the internal rate of return is expected to rise. The following are the major threats that Smith and Caugheys could experience through the purchase of a new building for improving its business operations: Global economic environment: It has been observed that there is definite uncertainty related to the global political and economic situations (Horkoff et al., 2014). With the volatility in the prices of oil and gas, the political turmoil is inherent in the global business environment. This could have negative impact on the demand for the top drive units for Smith and Caugheys. Hence, this would reduce the gross income and the net cash inflows of the organisation, which would have adverse effect on IRR. For mitigating this threat, it is necessary for the organisation to increase the portion of its retained earnings so that it could use the same for running its daily operations in such situation. Seasonal variations: Smith and Caugheys is susceptible to demand variations because of seasonality, as drilling operations could be conducted in specific areas when they are frozen and in some places when there is summer (Kotler, Berger Bickhoff, 2016). Therefore, seasonal variations could have influence on planning and execution of the proposed project, as IRR and gross income might increase or decrease based on the seasonal fluctuations. For mitigating this risk, new product lines need to be added so that the organisation does not have to encounter severe downfall in sales revenue due to fall in demand. Operating plans/ strategies: In order to meet the financial projections, it is necessary for Smith and Caugheys to undertake the following series of steps: The first step is to lay out the figures in a useful format and it needs to be organised in a manner for spending in each category of expenditure. The next step would be to contrast the overall expenditures with the total income for balancing its project budget. The third step is to ensure that the funds are utilised as set out in the initial budget plan, which could be made with the help of a spreadsheet. This is because it would help Smith and Caugheys to know whether it has enough in each of its expenditure categories. References: Bocken, N., Short, S., Rana, P., Evans, S. (2013). A value mapping tool for sustainable business modelling.Corporate Governance,13(5), 482-497. Hamilton, L., Webster, P. (2015).The international business environment. Oxford University Press, USA. Horkoff, J., Barone, D., Jiang, L., Yu, E., Amyot, D., Borgida, A., Mylopoulos, J. (2014). Strategic business modeling: representation and reasoning.Software Systems Modeling,13(3), 1015-1041. Kotler, P., Berger, R., Bickhoff, N. (2016).The quintessence of strategic management: What you really need to know to survive in business. Springer.