Would you, as the CFO, finance your projects as soon as possible if the cost of capital was expected to drop? Please explain.

As a CFO one always needs to project and predict the trend of a given interest rate in a
market environment. This, in turn, helps in coming up with a decision on the viability of the
project. I would finance them incase my project capital was to drop since I would want to be in
such a low fixed rate in order to insure my project from depleting its finances due to high rates in
interest. The overall cost of capita is actually the interest rate which costs the business to
obtaining financing. As a CFO if the total cost of the capital is bound to drop, then I would
finance it in future when the overall cost would have just dropped (Parrino, 2014) .
More importantly, where do you find the information to analyze expected changes in
interest rates?
The information is set to help in the key analysis of such expected changes in these interest rates.
This information can hence be obtained from financial authorities, capital market authorities and
financial intermediaries such as financial analysts who can use the previous and current interest
data rate to predict this future interest rate (Parrino, 2014) . Institutions which trade in securities
and stocks usually provide key information to investors and advise them further when to carry
out these investments. Nonetheless, I would still use after-tax FCF to analyze these expected
change in interest. Free Cash Flow equals the change in any firm's income excluding the interest
rate expense which the project is usually responsible plus amortization and depreciation for a
given project minus required investments and capital expenditures.

MONITORING THE COST OF MONEY: INTEREST RATES 3

References

Parrino, R. K. (2014). Fundamentals of Corporate Finance, Retrieved from
https://kaplan.vitalsource.com/#/books/9781118901656/..