Value creation of any organization is done through the business model. The model uses capital and activities as the input to produce outputs that creates or destroys the value of the organization over short, medium or long term (Lepak, 2007). Cash is overrated as a measure of value. This is because the management of paramount objectives is the creation of value for the owners of the firms. The mismanagement of a firm’s objectives due to making poor decisions can destroy the value of a firm and the firm will not be able to attract the equity capital it needs to fund its projects. Also, firms that take care of their employees and customers also deliver value to their owners. Therefore, the measure of a firm’s value cannot entirely depend on cash (Lepak, 2007).
The parameters that a manager uses to determine the value of a proposal include; Net Present Value, this is the difference between a proposal net value and initial net outlay required to implement the proposal. Another parameter is the cash only matter. This is where the initial investment needed to undertake a proposal and the stream of future net benefits it is expected to generate is measured in cash (Simon, 2010).
Delegate your assignment to our experts and they will do the rest.
The next parameter is the discount rates. Discount rate is the rate at which the future cash flow must be discounted to find its present value. The last parameter used by managers to determine the value of a proposal is the proposal’s cost of capital. This is where a proposal is funded by both equity and debt capital, it is the weighted average of the project’s cost of equity and its after tax cost of debt, where the weights are the proportions of debt and equity financing in the total capital used to fund the project (Simon, 2010).
Conclusion
For a proposal to be successful the parameters above must be followed. Successful proposal have followed these parameters and to emerged as the winners. We can also conclude that the for managers determining the willing to choose a proposal that will perform better for them and ensure that they have the best expertise to deliver quality goods and services must strictly follow the parameters listed above.
References
Simon, N. (2010) . Proposals . Cambridge [England]: Proquest LLC. Authorservices.wiley.com
Lepak, D. P., Smith, K. G., & Taylor, M. S. (2007). Value creation and value capture: A multilevel perspective. Academy of management review , 32(1), 180-194.
