Unit 3: cash flows and capital budgeting – discussion
As the CFO, I will finance all my projects immediately if capital costs drop. This strategy makes use of the potential decline in borrowing costs. By doing so, it reduces risk and allows for a greater return on investment.
To determine if and how interest rates will change, I’d review the current economic trends, such as GDP growth rate, inflation, and other reliable information sources like government reports and central bank information platforms, Bloomberg and Reuters. Additionally, depending on what type of loan is being applied for (fixed-rate or variable-rate), monitoring the Federal Reserve’s target rate and future expectations can also help anticipate future changes in available credit markets which could influence decisions when deciding whether now best time start project not rather wait little longer accumulate more funds cushion blow should something happen unexpectedly.
To analyze expected changes in interest rate requires financial knowledge.