Valuing Internal vs. External Opportunities

Consider the role of the finance department at Strident Marks. The finance department has a couple of new hires, and the CFO has asked that you spend a short amount of time with them, catching them up on some areas that are very important to the company at this time. These also happen to be areas for which Strident Marks does not yet have any training material. Write what you feel should be included in their training manual about the components of financial systems, focusing on valuation. What role does a financial department play in valuing business opportunities and what are some of the key financial concepts that valuation work must consider?

Objective: The student should make the distinction between valuing internal opportunities (new projects) vs. valuing external opportunities (acquisitions), as these are two separate (albeit related) disciplines. The student should also demonstrate an understanding of the key concepts in valuation: cash, risk, and timing of the cash flows.

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