The Investment Detectives
By: suraj.upadhyay75 • Essay • 1,014 Words • October 20, 2014 • 773 Views
The Investment Detectives
Case Analysis:
The Investment Detectives
Group Members
PREPARED By: | |
Kumar Vivek | MP13031 |
Rajeev Das | MP13040 |
Sanjiv Ranjan | MP13048 |
Suraj P.Upadhyay | MP13062 |
Vishav Bandhu Sharma | MP13070 |
Case Background
Capital budgeting and resource allocation is a major job of an entrepreneur. Any wrong investment will lead a major loss to the organization. With the limited budget (Capital Sources) and several options available for investment thing become tougher. The capital budget analyst work is to find the bad evidence from good looking projects. That is why they are call detectives.
Case Issues: An overview
There are eight projects with initial investment of $2 million and yearly cash flow as in the table. Figures in red provided the year in which payback was accomplished.
Project No | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
Initial Investment | -2000 | -2000 | -2000 | -2000 | -2000 | -2000 | -2000 | -2000 |
Cash inflow in year 1 | 330 | 1666 |
| 160 | 280 | 2200 | 1200 | -350 |
Cash inflow in year 2 | 330 | 334 |
| 200 | 280 |
| 900 | -60 |
Cash inflow in year 3 | 330 | 165 |
| 350 | 280 |
| 300 | 60 |
Cash inflow in year 4 | 330 |
|
| 395 | 280 |
| 90 | 350 |
Cash inflow in year 5 | 330 |
|
| 432 | 280 |
| 70 | 700 |
Cash inflow in year 6 | 330 |
|
| 440 | 280 |
|
| 1200 |
Cash inflow in year 7 | 330 |
|
| 442 | 280 |
|
| 2250 |
Cash inflow in year 8 | 1000 |
|
| 444 | 280 |
|
|
|
Cash inflow in year 9 |
|
|
| 446 | 280 |
|
|
|
Cash inflow in year 10 |
|
|
| 448 | 280 |
|
|
|
Cash inflow in year 11 |
|
|
| 450 | 280 |
|
|
|
Cash inflow in year 12 |
|
|
| 451 | 280 |
|
|
|
Cash inflow in year 13 |
|
|
| 451 | 280 |
|
|
|
Cash inflow in year 14 |
|
|
| 452 | 280 |
|
|
|
Cash inflow in year 15 |
|
| 10000 | -2000 | 280 |
|
|
|
Sum of Cash Flow benefit | 3310 | 2165 | 10000 | 3561 | 4200 | 2200 | 2560 | 4150 |
Excess of cash flow over initial investment | 1310 | 165 | 8000 | 1561 | 2200 | 200 | 560 | 2150 |
NB: 1) discount rate: 10%