Acquisition of a new piece of equipment for coca-cola

Coco-Cola has plans of acquiring a brisk piece of equipment. The confederacy is likely to get support problems under the following scenariosRiskCoca Cola would run a financial risk problem dep displaceing on which source of finance they gaze to use in financing this new attend. A firm all utilizes its internally generated resources or borrows from outside. However, the internal sources especially the retained earnings whitethorn be insufficient compelling Coca Cola to borrow by issuing either debentures or preference shares. Such external sources of finance give rise to fixed interest charges, lead to financial riskness that may force Coca Cola to be bankrupt. (Bower, 1990)CostThis new wander is a capital investment and by their nature, capital investments involve amply initial cash outleys. (www.teachmefinance.com/capitalbudgeting.html). In addition to the initial cost, Coca- Cola would similarly incur huge incidental costs related with the installing of this new equipment these include labor and carriage costs. More new(prenominal) notes would be incurred in employee training on its usage . Coca Cola tho would have to look into ways and means of getting additional funds which are essential in meeting these costs.PoliticsSome mount members of the decision-making organ of Coca Cola may not be well-situated with this investment plan and therefore may not pass it. The end result of this decision would be that the funds may be channeled to other projects. This is because Capital projects by their nature, need prioritization be done since there may be insufficient funds of financing all the viable projects that the company might have passed.Economical FactorsThe budgeted funds to fund this new project might be insufficient due to government changes on the revenue enhancement policies and any other legislation that may be inherent inwardly the government system.Cost and benefit estimatesIt is estimated that the new equipment would generate the follow ing after-tax cashflows division before tax cash flows1. (10,000)2. 10003. 25004. 30004. 40005 70008 70009 500010 4500email&160protected%Net cash flows 16,800The initial investment is $ ten thousand(www. Swlearning.com/finances/students/capitalbgt.htm)REFERENCESJoseph L Bower, Managing the Resource Allocation Process, Harvard Business School Press, 1990.