Accounting Due in Part That Essay

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As such, their may be little money to invest in expansion, organic growth, acquisitions, and so forth. This can potentially be a detriment to the company as they may be unable to pursue business initiatives that may otherwise increase earnings and profitability of the firm. By not pursuing these initiatives, the company is actually limited its overall amount of growth as the company can not fully invest in strategic initiatives.

3) Yes, the company can issue common stock to the lawyer. To determine the price of the common stock, the owners should use a discounted cash flow analysis. Both Curtis and Natalie must estimate how much the future cash flows of the business are worth, today (Ruback, 1995).

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In this instance, both Curtis and Natalie can project out the earnings of the company over the coming years (5-10 years). As they project the possible earnings of the business, they can then discount those earnings back using an appropriate discount rate of return. This interest rate should take into account various risks including liquidity risk, solvency risk, interest rate risk, and other risk premiums. After doing so the number they arrive at should be the price of one share of common stock. They should then divide the lawyer's initial $750 investment by the price of the individual shares to arrive at the overall amount of shares they should issue to the lawyer (Pablo, 2004)......

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