Provide a critical analysis for the financing source available and comment on the DPC’s capital structure and advise DPC’s owner on his reaction.

                owner must consider all the expenditures of the institute at very first because for maintenance and for starting the institute the main expenditure must be bear by owner and for this he has to prepare a huge amount which he take from banks as loan and also invest its personal capital in the institute. Because he want to recover the entire amount from the students and from administrators of the institute that are going to run the institute with their effective management and make smooth strategies for recovering all their expenses. All those areas that are going to involve including students must be allocated all the expenses according to their usage and their worth.  The capital structure of the college must be strong and must be depend on the strategies that are helpful in recovering all the expenses and also help to maintain its profit and earning among its shareholders. The assets and liabilities of the college must be maintained in balance condition so that their utilization must be beneficial for the college and for the owner also. Owner has to consider all the resource of payment carefully and also determine what are the effective methods that are helpful in recovery all expenses and how college can generate revenue through admission of students and also bear all its expenses because at annual basis some expenses are occur and some occur eventually. So it’s the responsibility of the owner and then its management to make such as effective strategy that are supporting hand for the institute and also provide better path to manage all its expenses because all expenses are important and also compulsory for the institute.

        Critically analyzing the financial sources and DPC optimum capital structure we can advise owner that his decision of acquiring building as asset of the company is not right if he is going to finance this transaction from the college assets. Somehow, if they are interested to invest more capital in the business from his personal assets to make college generate more profit then decision is right. Making huge transaction from assets could cause liquidity or solvency related problems. Somehow, other than decision of acquiring building is good as it can lower huge expenses and cost of operations. Moreover, building acquisition is also capable to deliver high profit or return on investment to DPC Company. Total expected increase in revenue is 3%. While during this expense of depreciation and interest would increase by 2% but financial situation will remain in profit as acquiring building will remove rent expense. Reduce in rent expense can provide high profit margin therefore owner don’t need to worry about increase in depreciation expense. Moreover, college also have an opportunity to sale out building at 700000€ after 5 years. Therefore there are chances that owner can sell out building and earn profit in case he fails to maintain net income of college operations as a result of this acquisition.