Evaluation of Investment Opportunity of Nexus Plc

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But all those funds are procured at a certain cost and after entailing a certain amount of risk. If there is a failure in the proper utilization of funds, the running of the business will turn out to be meaningless. The funds are to be invested in a proper manner, and then the enterprise is able to produce optimum results without affecting its financial solvency. The financial implications of each decision to invest in various fixed assets are to be properly analyzed. Therefore, while taking an investment decision, it is necessary that the finance manager should possess sound knowledge of the techniques of capital budgeting. In addition to this, it is also necessary to give emphasis to the effective maintenance of adequate working capital.
As far as the working conditions and the projected financial scenario of Nexus Plc are concerned, the investment decision of Nexus Plc is quite important. The global economic recovery in 2004 led to a rise in interest rates around the world, which coincided with a surge in commodity prices caused by strong demand and uncertain supply. Although inflationary pressures were kept at bay, a divergence of domestic conditions in 2005 led to a variation in international monetary policy that helped equities to rally and bond market performances to be wide-ranging. (Economic Highlights of the Year. 2005). In addition to this, it is also important to evaluate the concept of corporate governance while taking an investment decision. Moreover, the concept of capital budgeting is an effective tool for taking the appropriate investment decision. At the time of taking adequate investment decision, the Weighted Average Cost of Capital (WACC) is crucial. Cost of capital is an important concept that determines the effective running of a business entity. The measurement of the cost of capital of each source of finance also helps to evaluate the overall cost of capital of the entity as a whole. The composite of the overall cost of capital of a firm is the weighted average cost of several sources of funds.