The state of California should consider selling the institution by first determining the goodwill of its

major assets and the institution as a whole. For a positive consideration, the institution should consider
ROI in terms of value and strategy. The institution should put into consideration its strategic component
and what it brings to the market/buyers in a given period of time and which will increase financial figure.
The institution can sell some of its assets or rent out the building that is no longer in much use and
which do not generate enough revenue to cater for their expenses. Such buildings such as the social
halls and the libraries can be sold, leased or rented out. The income generated from the proceeds can be
used to fund other school activities and in the end, reduce operational costs. With its long-term period
of ownership, some shareholders may find it hard to let it go but for the sake of increasing productivity
and returns, necessary adjustments shall be made. The use of library services will reduce and the
building sold or not invested into it altogether.

As the institution was carrying out its major activities, they were using long-lived assets to execute their
intended purposes. Some of these assets are tangible such as equipment’s and building and hence will
cause depreciation expenses among operational cost while calculating the cash flow. Intangible assets
such as brand names will generate enough goodwill when the institution will be sold out. Depreciation
of the institution major properties, plants, and equipment shall be of major concern. The net present
value of the properties such as buildings, land, brand name and team sports should be determined. The
income that they will generate in future for the institution considering the investment costs is
important. The income obtained from selling some of the institution properties will be invested on other
alternative securities and investments such as bonds and shares at the private and public market
capitalization. While this other investment option will be put into consideration, the risk factors are very
important. The higher risk investment will raise the ROI by a significant amount and the difference is the
risk

For example, for the case of the university described by the governor, the institution will consider the
fair value of all assets of the institution in the present moment and make important accounting
calculation. The fair value of the net identifiable assets expected to be sold will be determined and they
will be compared with purchase costs. Then the net present value of these assets will be calculated to
determine the amount of cash flow they could have generated over the future less the net realizable fair
value at the moment. A proper discounting method shall be selected. The NPV will be used as compared
to the IRR because the cash flow expected from the investment is not sensitive to cash flow amounts.

Pepperdine offer of $100m should be considered only if it will have a positive net present value. The
interest payment from the debt over 7 years will be good since the interest is an allowable tax
deduction. The present value of total payment will be subtracted from the initial payment of $100m.
The offer will be affected by factors such as the future returns expected. While the thought about the
power of college and university education is overwhelming, it’s important that the various stakeholders
decide on making a necessary adjustment that will encourage cost-cutting and improve efficiency. In the
context of modern technology and mainstream media such as YouTube, the profit-making big institution
should consider employing these new technologies to reduce operational cost. For example, the library
and other crucial learning facilities that can easily be accessed via the internet can be replaced with
other facilities.

The return on investment of the existing assets are important and they will need to be calculated. The
value of the product line will be estimated and the library can be easily be replaced with other
important viable options that will guarantee higher income generation. The biggest institution, colleges,
and universities for profit-making are not funded by any state or agencies. However, they are supposed
to make as much money as possible in the least cost possible. They have invested in education for
business purposes. An example is the CSUSM which should invest wisely its resources to gain a higher
return. Some factors for consideration include: There is an increasing anxiety in investing in higher
education in the current periods. This is caused by reason of increased tuition and student number.