RESPOND TO THE DISCUSSION AND NUMBER RESPONSES ACCORDINGLY (150 WORDS EACH) F4.15  You are the CFO at a manufacturing company. Your company is anticipating an impending cash crunch. What short-term working capital strategies might you employ? Why? In what order would you implement them? Why? What part of working capital management does a company have the most control over? Why? What does a company have the least control over? Why? F4.11  Again—- I offer and mostly accurate simplifiied method of thinking about Cost of Capital.What is Capital—–?      Either it is Money or something you can probably buy with money.    So,, for simplicity—- let’s call it money.What is the cost of money?      For most of us——————-it is the interest we pay on a loan.    You can look at opportunity costs as well.For a corporation—- it is much the same—– interest on a loan, interest on Bonds,  Required return on stock—Opportunity cost.Again—- this is over simplified but it is a working definition.  F4.11a  I am not sure I think Political Risk is a Financial Risk—- strictly speaking —- but is certainly has financial ramifications.   I know, I am splitting hairs.I also tend to think that most people thing of political risk in terms of big events like Ukraine.   While this is clearly a political risk situation,  most of the big risk are usually avoided.Companies generally are not investing much in high risk areas—- often because they are prohited from it, but also because it does not make good business sense.There are a lot of smaller risks that do not get much press.One you have a $10 Million plant in Slovakia ,  what do you do if they change tax laws, employment rules,  environmental laws?I think we all remember when jobs were moving to Mexico very rapidly, due to low wages.    Well, that drove wages up quickly.   My company saw the rate double in 2 years.  It wa not a lot of money– -a few dollars per hour—- but it was enough to stop the transfer of jobs.   My point,  it does not take a big change to make a good decision into a bad one.With political risk– these changes can happen with the stroke of a pen. F4.13a.  Each method of analyzing a project has its benefits and its flaws.  The simple payback period should only be used for very short periods if using this method against NPV and IRR.  Simple payback doesn’t take into account the time value of money.  NPV takes the time value of money exclusively into account and can compare projects in today’s dollars.  The NPV takes into account cashflows after the amount is repayed where as the simple payback period does not.  An analyst can adjust differing risk by comparing the projects by using all methods; simple payback, IRR, and NPV.  Especially using the NPV and IRR will help analysts determine which is a better project based on their individual criteria.  Both results can be plotted and graphed for a better decision in their approval process.    F3.41  When we discuss corporate bonds, I think of GM’s bondholders.  I can’t help but think about how the bondholders at the time of GM’s struggles basically had their money stolen by the US Government and the unions. Despite having put in more than the government and the unions, the bondholders received a much smaller portion in the new company than a proportional amount would be. While I agree that these times are very difficult and unusual, I don’t think that changing the rules for who is in line for what when a company struggles is a good thing to do.I would imagine that the way in which bondholders were shoved aside in the GM situation would have a negative impact on any other companies that want to have a bond offering. No longer can bondholders be ensured of their ‘place in line’ in difficult times. Instead, they are left to wonder if the government will step in front of them if their company has struggles. If they are afraid of this, they will require even higher rates on bonds (to compensate them for their increased risk). This will increase the cost of capital for companies, and will lead to lower profitability of these companies.Following are just a couple of articles that talk about this.http://sweetness-light.com/archive/statement-from-screwed-gm-bondholders http://www.usatoday.com/money/autos/2009-04-27-gm-bond-proposal_N.htm What does everyone think? Was what happened to the bondholders fair? Was it necessary? Are there other articles that look at it from a different viewpoint?    F3.41a  The junk bond offer high risk because the company issuing the bond may not survive and fold leaving the investor no return on their investment, but in the situation the company the only thing to do is offer a higher return for the investor that is taking the risk with the struggling company. It is always a good idea to do the research on the junk bond if you are a new investor because of the rick that is involved with the junk bond. With all of the risk involved with bonds the most tolerable in my opinion is the interest rate risk, the rate will always fluctuate and it may be beneficial because the bond is at a higher rate of return, but also has a downfall of a lower rate and a less return. Rates will always change but it could be less of a risk then a credit default, or a rating downgrade. F3.41b  Junk bonds offer high returns because there are fewer defaults on them. They became attractive investments because investors believed they outperformed highly rated bonds and treasury securities. They offer high risk because they have a credit rating below investment grade.The point that they are high yield bonds is tolerable to me. When you buy a lower class bond, the return rate is probably higher than a bond that is higher priced. Higher yield bonds generally bring in a higher return than highly rated bonds. F3.41c  Junk bonds present high returns with high risk together with a high default risk.  Junk bonds have a lot of value oscillation with higher instability and bigger risk of default.  A poor financial system and growing interest rates can also aggravate the return.  As interest rates go up, bond prices go down.  I think junk bonds have one of the smallest ratings.  As a result they are the last to get rewarded, but when they do they have a high rate of return.  Depending on the corporation one is acquiring the bonds in I trust that the risk of default would be the most reasonable.  I think the maximum risk of default would be in purchasing U.S. Treasury bonds.  These bonds are supported by the federal government.  When a bond is issued by the state or local government they have a bigger risk of default because it is dependent on the monetary health of the issuer.  Interest rate hazard is one more form of risk that is reliant on the market.  If interest rates rise then the costs of bonds generally plummet.  The lengthier term of maturity on a bond, the bigger the interest rate risk is.