Chapter 13 Investment Project Evaluation and Risk Management

Financial Statements Part two

Part 1. Answer the following questions, within 100 words minimum

Need by 8/01/2018

Chapter 13 Investment Project Evaluation and Risk Management

Project evaluation alternatives

1.  Under what circumstance would project evaluation methods be used?  Define and explain the pros and cons of NPV, IRR, and Payback methods.  As a small business owner which method do you think you would find most useful.?

Risk and Uncertain

2. What is the difference between risk and uncertainty? Where would the risk come from? And what are the methods of risk management?

Types of Project analysis

3. What is the major difference between the independent project and the mutually exclusive project? And would the evaluation process be different for each?

Selling all or a part of the business

4. What factors would influence the decision to sell a component of the business to raise capital to facilitate growth of another component of the business? If you owned a small business, what factors would influence a decision to sell the entire business?

Chapter 14 Business Valuation and Harvesting


5. What is harvesting? And why would the business need to plan for it?

Going Public

6. List and briefly explain at least five of the reasons why going public is not a good idea.

Valuation Approaches

7. There are two basic approaches that can be taken to determine a business valuation. What are they and how would the value be calculated under them?

Business Valuation

8. You have found a potential business of interest.  How would you value the business?  What are the major tools for valuation and what are the pros and cons of these methods? Why might harvesting strategies be useful to a business?

9. What kinds of payment terms might the business venture have with its vendor to help manage its cash flow?

Determining Cash Needs

10. How would you determine the need for cash in your business?   Give an example to illustrate your answer.

Chapter 16


11. List key factors needed for consideration in choosing a business location?  Why is location a key finance factor for most businesses?

Part 2: Funding the Business Need by 8/02/2018

Successful small business owners look to others for counsel on important business decisions. In this assignment, you will come up with ideas, calculate risks, and contemplate opportunities related to choosing a location for your business operations.

Your company is thinking about purchasing a small, successful business. You have two choices: Small Business A or Small Business B. The purchase price of each business is $250,000 (and you cannot spend more than that, so acquiring both is not an option).

Review the following data:

Small Business A: Revenue = $100,000 in year one, increasing by 10% each year. Expenses = $20,000 in year one, increasing by 15% each year. Depreciation Expense = $5,000 each year. Tax Rate = 25% Discount Rate = 10%

Small Business B:  Revenue = $150,000 in year one, increasing by 8% each year. Expenses = $60,000 in year one, increasing by 10% each year Depreciation Expense = $10,000 each year Tax Rate = 25% Discount Rate = 11%

Assignment Steps

Identify the key factors to be considered when it comes to choosing a business location.

Analyze how models such as Reilly’s Law of retail gravitation can affect understanding the competition and financial success.

Create a team presentation of 25 slides in total with appropriate references in which you outline the key factors you used to select a business location. Explain why the choice of location can make or break a business, and analyze how capital budgeting impacts location in both the short and long run.

Note: for your presentation make notes.