Assignment
Why do firms borrow capital that has to be repaid rather than finance a firm with 100% equity? How would you recommend that a hospitality firm finance its growth? Why?
Besides cash, what are three forms of financing that lenders often consider as equity when making a loan? Why would lenders use these forms of financing? Explain your answer.
Assignment 1
Assume you are the developer of major hotel properties and are interested in developing a new project on the beach in Puerto Peñasco, Mexico. Compose a 200- to 300-word memo to one of your partners in response to her questions regarding the project:
Which of the financial schemes should we choose for our venture: timeshare, condominium, or mixed-use? Why?
What financial advantages does this financial scheme have over the others?
What are the disadvantages to the other schemes?
Which of the schemes present the least amount of risk to us? What about the most risk?
Assignment 2
Compose a 400 to 600 word response to the following:
Explain the concepts of debt, equity, and weighted average cost of capital (WACC). Please don't show formulas for WACC.
Why is WACC so important for a business owner to understand?
Why would a business owner look to maximize the amount of debt he or she can borrow and minimize the amount of equity he or she would need?
If debt is less expensive than equity, why is a business owner not able to use 100% debt and bypass the equity investor all together?