You will prepare and submit a term paper on The ways of financing activities/investments of the organization. Your paper should be a minimum of 750 words in length.

You will prepare and submit a term paper on The ways of financing activities/investments of the organization. Your paper should be a minimum of 750 words in length. This research will begin with the statement that net present value refers to a technique of appraising projects to determine their viability and hence whether the firm should undertake them or not. The decision criteria are that projects with a positive Net present value should be undertaken while those with negative Net present value should be ignored. To get the net present value, the cashflows accusing from the project discounted at a given discounting rate. However, it should be noted by Jovi plc that not all projects with a positive NPV should be undertaken. It all depends on the availability of sufficient capital to undertake such project(s). If the firm undertakes projects requiring huge initial cash outlays however viable they might be in terms of NPV it is likely to have cashflow problems. On the other hand, the Net present value method of appraising projects suffers from one drawback – It assumes that the cost of capital /discounting rate remains constant during the economic life of the project. This is unrealistic since the riskness of the firm changes over time and the cost of capital should also change. Jovi plc should toy to improve its cashflows by for instance increasing its sales volume. Though, it should ensure that there exists a stringent credit policy whereby customers are given short duration to pay up their debts. It should also encourage sales on a cash basis since credit sales tie money up leading to cashflow problems. Preference should be given to projects whose payback period is short.