Interest Rate Determination
The assignment and research work done seeks to address, understand, analyze and select an investment opportunity from three different companies dealing in different goods and services and selecting which company one would invest in and at what interest rates which only comes after analyzing the companies. Introduction The companies that are to be analyzed then decision made on would include, Acme consulting, interstate travel center and Silvera and sons.
Acme consulting- this is a company that seeks to provide consultation services specializing in the marketing of products of high quality in the high technology in the Large international markets, the other company to be analyzed below is Silvera and Sons limited- it prepares green Arabic coffee beans grown in Brazil for exportation and sell to the wholesalers in the Brazilian market, it is an existing company that only seeks the expansion of the provision of its services from its Current export of 72,000/60Kg Bag to between 120-160,000/60kg Bag(http://www.
bplans. com/Sample_Business_Plans/Farm_and_Food_Production_Business_Plans/Coffee_Export_Business_Plan/executive_summary_fc. cfm) The third company is interstate travel center which according information retrieved from their business plan indicates that it a company to be established in Dallas, Texas and seeks to solve travelers problems by providing for them efficient services that would include gas/Diesel islands that mostly targets truck drivers and Their restaurant and other travel efficiency amenities that targets the booming tracking business.
The third company –interstate travel center as indicated in their business plan seeks to address the truck drivers for efficient travel. The main objective of the of the study of the these companies business plans is to understand the nature of the business, the risks involved in these investment opportunities, which in relation to other studies can help in the determination of the interest rates that an investor would expect If he invests his money in any of these companies. (http;/www. morebusiness. com/templates_worksheets/bplans/acme.
brc) Introduction After the analyzing of the business plans in the three companies an investment decision. The decision is mostly being guided by the interest rates, which in many cases are determined by opportunity cost, which according to Kellison (51) can be described as any other use in which money can be put into, he further explains that, it also includes lending to others or putting in other investments, keeping the cash to be spent later for safety purposes or deciding to spend the funds which ought to have been invested.
Other factors that help in the determination of the interest rates are inflation- this is determined by the future value /cost of money, the investor must decide on the future maturity of the money. Kellison further puts in that the interest rates for these three companies can be determined by the risks that are involved that is default of the company to repay the investment- under the default the company might decide not to repay the invested amount due to bankruptcy and the risk that they might not succeed in their business plans hence heavy loses which cannot be offset its liquidation.
In the determination of the interest rates Kellison tries to further explain that an investment that takes shorter time have less risk of default in payment and therefore it would not take a large interest rate. Data analysis (Company business plan analysis) This section seeks to analyze the investment possibilities of these companies from their Business plans Acme Consulting Company After analyzing plan of this company it stands out to be a good investment opportunity tat has a chance of expansion and later improvement that would result to higher dividends.
The plan gives the opportunity for external investors and therefore those who want to invest can do that. Although the investment does not need a lot of funds to be invested it stands at a good chance of expansion since in the world over all the activities are technologically oriented and all the activities involves technology and with the improvement of technology it can be targeted for future higher growth (Kellison 51) The company is to be managed by professionals who are believed to be extensive, detailed and efficient and this can be demonstrated since they have already identified their competitors and determination their weakest points.
According to Gasper Vitor etal (28) its interest rates can be estimated at 12% per annum and it will hold many investor funds. The company plan is very practical and achievable and the returns are good for small investments since it’s not much risky Interstate Travel Center As indicated in the Business plan it’s a good business plan and idea since there are a lot of business travelers that needs efficient accommodation and other services. The business forms a large portion of the USA business trucking business and therefore it looks so successful.
In this investment opportunity one has to give it a lot of emphasis before he decides to invest into it simply because it will be developing in phases and also because it’s a stat-up business- a plan that has not been realized The interstate travel center is to be solely managed and owned by two individuals who may not be very much objective but be subjective to meet their personal interest and therefore this might provide a challenge to the prospective investor, the two primary investors and owners seeks further to clarify that they may not any shareholders, this provides an even lager challenge to other prospective investors.
Even though there are such challenges the company proves to be well planned and well placed into phases, this is so superb in addition to their advertising plans to reach the target customers. The projections may be achievable and for along time investor who wants to invest a lot of cash this is the best investment opportunity Silvera and Sons This is a good company plan with realizable growth rate that is obtained because of its good advertising plan and the niche to be covered.
Although the capital is big the risk involved are not so much high Watkins an attorney from his website http://www. genserandwatkins. com/articles/presentvalue tries to explain that no matter the risks involved in the company investment the correct interest rate for estimating the interest should b e 8 per cent . (http://www. bplans. com/sample_business_plans/Car_Wash_And_Automotive_Business_Plans/Truck_Stop_Business_Plan/executive_summary_fc. cfm) Conclusion
Under consideration of all the three companies the company that I would invest in when having a large sum of money is interstate travel center, which has discussed above has a potential of growth and large interest rates. Works Cited. Gasper Victor etal. Interest rate determination in the inter bank market, European Central Bank, 2004. Kellison Stephen G. the theory of interest, library of Congress, Washington DC, 2005. Genser and Watkin. Attorney;s Law. Retrieved on the 10th June 2008 fromSample Essay of Custom-Writing