The North Sea Oil Company

1600 Words7 Pages
Capital budgeting is one of the essentials in marketing decisions for many companies, and it determines whether the invested projects are worth pursuing in the long run or not. Great sums of money can be easily wasted if the investments turn out to be uneconomical and wrong. Therefore; smart investing is very important for the companies that are looking for future growth and success in the both domestic and global marketing. Successful investment projects benefit to the companies by increasing in cash flow and decreasing its risks. North Sea Oil Company is one of the companies that is looking for future increase in cash flow and decreasing its risks by smart investing into two projects. Therefore, this portfolio project will address about the North Sea Oil Company’s proposed capital budgeting projects by using capital budgeting techniques to calculate and evaluate the company’s weighted average cost of capital, payback period, net present value, and internal rate of return from the given case information because calculating the capital structure based on the assumption the projects are implemented will give the investors either positive or negative signals. Weighted Average Cost of Capital (WACC) There are two main sources that a firm can use to raise capital are equity and debt. Weighted average cost of capital is the average of the costs of these two sources of finance, and it gives each one the appropriate weighting. When a firm takes a new project, it usually
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