Ginny’s Restaurant: An Introduction to Capital Investment Valuation Key issues-
Virginia invested in Ginny’s restaurant and she will receive $2 mn as well as $3 mn after one year from today without any other assets, for period of one year with interest rate is 6%. 1. Virginia’s current wealth (Present value of assets) is $4.83 mn. If she spends $2mn today and $3 mn after one year, then after one year from today she will get $5.12 mn.

2. If Virginia has an initial endowment of $4 mn. The future cash flow given as investment today and future cash flow respectively as 1.0, 2.0, 3.0, 4.0 and 1.8, 3.3, 4.4, 5.4. Virginia should invest $3 mn out of $4 mn and after end of one year she will get $5.46 mn.

3. Suppose the Virginia has a strong preference for current versus future consumption and would like to consume at least $3.8 mn immediately. Thus she would have to borrow $2.8 mn.

4. If Virginia does not have $4 mn but still has necessary skill to develop and operate restaurant. By taking loan of $3 mn she should make the investment in the restaurant.

5. If all individuals, savers and spender, prefer current consumption to future consumption, all other things equal, spenders have a relatively higher preference for current consumption. If Virginia shares her ownership interest in the Virginia corporation with widely-diffuse group of investors, savers and spender both would be happy with the option of to invest $3 mn, it would optimize both future value and current value.

...It is important to estimate the benefits of investment wherever possible. Any project which requires an outlay of money or other resources and which then generates a flow of costs and benefits in subsequent periods should be regarded as an investment. The financial appraisal methods helps in guiding whether to incur an expense now so that benefits can be ripped in later periods (investment), or whether the funds should be used to generate immediate benefits, now ( consumption )
Deciding where to focus the investment of an organization is a key for building the business. The various investment appraisal techniques lets a business assess the effect of an investment that will have on cashflow.
There should be sufficient information required to know the project designed for, the different objectives of the project and analyse the benefits and drawbacks of the projects. If interest rates are considered to be high, individuals will be tempted to forgo current consumption. If interest rates are low, individuals will not be induced to save. The investors (private companies or public agencies) who wish to use savings, the role of Interest rates paid on forgone consumption, will find that low interest rates render more projects viable as it’s now more worthwhile to transform interest earning money into a profit making investment, and the demand for funds will thus increase. High...

...Investment Analysis Tool [IAT] Instruction
This memo is intended as a help manual for users of the Investment Analysis Tool. It is my hope that this document will be sufficient to guide a new user through the functions of the IAT and even to feel comfortable enough to create new ways in which to use it for hospital investment decisions.
For ease of use, the memo is divided into the following sections:
I. Overview ofInvestment Analysis Tool
II. Instructions
III. Potential Uses
IV. Review of Investment Appraisal Methods
I. OVERVIEW
The Investment Analysis Tool [IAT] is a simple and straightforward pair of financial spreadsheets that can facilitate, streamline, and perhaps even standardize the capital budgeting process.
The IAT evaluates the attractiveness of a potential investment by analyzing its associated cash flows [i.e. inflows and outflows]. A user need only enter a few key variables regarding the investment and the spreadsheet automatically analyzes its attractiveness.
Three traditional investment appraisal methods are used by the IAT. They include:
• Pay-back Period
• Internal Rate of Return (IRR)
• NPV
Included in the IAT are two spreadsheets with slightly different functionality. They are named:
1). Automated
2). Manual
The main difference between these...

...Assignment
Big Investment in Small Hotel
1. Is it a good investment? If so why? What can change the investment from a good one to a bad one?
There are different methods by which an investment can be evaluated. The method of choice would usually be the comparison of the Net Present Values of two investment opportunities as only the Net Present Values take into account the time value of money, the cash flow and cost of capital. Furthermore, the Net Present Value shows potential investors when they will be able to recuperate their investment. It also shows how much value is created or destroyed as a result of undertaking a project. Finally, the Net Present Value measures the attractiveness of a project in today’s pounds. This means that several projects can be combined. If a choice is given between two investment opportunities, the investment with the larger Net Present Value should be chosen.
Another method of calculating the merits of a project is the Internal Rate of Return. The Internal Rate of Return is useful because it is easy to calculate and it only depends on the cash flow of the particular investment project. On the other hand, the Internal Rate of Return only gives a percentage and no absolute value.
Judging from the values of the calculation, it is fair to say that the investment in the hotel room is...

...transmittal
Dear Mr. Saif Rahman
Here is the term paper on investment analysis & portfolio management from 31st may to 1st august.
Now you will see that we have collected stock information and calculate relative things to evaluate our performance. We think that if anybody want to invest in the DSE , this term paper can help them to make decision whether or not they will invest or not and what strategy should they follow. Finally, we are also very much satisfied to have the scope of doing this investment which gave us the practical flavor like working in a real workplace.
We really hope that you will enjoy reading our term paper as much as we had enjoyed doing it. Thank you very much, for giving us such an opportunity to complete such an interesting term paper.
Sincerely yours
Mohammad Saifujjaman 073 442 030 _____________________
M. Ashikur Rahman 081 076 530 _____________________
Wael Ahmed 081 256 030 _____________________
M. Shafayet Hassan 081 305 030 _____________________
Acknowledgement
We would like to thank all the authors of the journals, books and articles that are secondary sources from where we have collected necessary information regarding our term paper. Also we would like to thank the fellow classmates who helped us when we faced any problem.
Our report was the endeavor of a great experience on both the practical and the theoretical field of portfolio investment simulation....

...Explain the theoretical rationale for the NPV approach to investment appraisal
and compare the strengths and weaknesses of the NPV approach to two other commonly used approaches.
One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land, buildings, machinery, etc., in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan of the investment, the degree of risk attached and the cost of obtaining funds.
The main stages in the capital budgeting cycle can be summarised as follows:
Forecasting investment needs.
Identifying project(s) to meet needs.
Appraising the alternatives.
Selecting the best alternatives.
Making the expenditure.
Monitoring project(s).
One of the most important steps in the capital budgeting cycle is working out if the benefits of investing large capital sums outweigh the costs of these investments. The range of methods that business organisations use can be categorised in one of two ways: traditional methods and discounted cash flow techniques.
The Net Present Value (NPV) is a Discounted Cash Flow (DCF) technique that relies on the concept of opportunity cost to place a value on cash inflows arising from capital...

...Prepare a critical evaluation of three basic methods of evaluating an investment (IRR, Payback and NPV).
There are several basic methods of evaluating an investments that are commonly used by decision makers in both private corporations and public agencies. Each of these measures is intended to be an indicator of profit or net benefit for a project under consideration. Some of these measures indicate the size of the profit at a specific point in time; others give the rate of return per period when the capital is in use or when reinvestments of the early profits are also included. If a decision maker understands clearly the meaning of the various profit measures for a given project, there is no reason why one cannot use all of them for the restrictive purposes for which they are appropriate. With the availability of computer based analysis and commercial software, it takes only a few seconds to compute these profit measures. However, it is important to define these measures precisely.
The internal rate of return (IRR)
The internal rate of return (IRR) is the discount rate often used in capital budgeting that makes the net present value of all cash flows from a certain project equal to zero. This in essence means that IRR is the rate of return that makes the sum of present value of future cash flows and the final market value of a project (or investment) equals its current market value. The higher a project’s internal rate of...

...The Investment Detective Case
We can use normal investment to calculate the data, but we also can do it as reinvestment to invest every project for the same years. For every question, I will give answers for both normal investment and reinvestment.
1. We can rank the projects simply by the cash flow data.
Normal investment:
Rank
1
2
3
4
5
6
7
8
Project number
3
8
6
1
5
7
4
2
Cash flow
8000
2150
200
1310
2200
560
1561
165
Reinvestment:
Rank
1
2
3
4
5
6
7
8
Project number
3
8
6
1
5
7
4
2
Cash flow
8000
4300
3000
2620
2200
1680
1561
825
However, the rank simply inspected by the cash flows is not the best method to evaluate the projects. Because this method does not consider time period, WACC, Net present value and other factors. All the factors could affect the value of project.
2. To evaluate the investment projects, we can use 5 main methods, NPV, IRR, MIRR, payback and discount payback. Each method has different advantage to evaluate the investment projects. It is better to use NPV and MIRR methods to evaluate the projects. NPV can provide basic accurate methods to use time value of money to estimate investments. MIRR includes both WACC and reinvestment rate; therefore, it is more accurate to evaluate the investments.
3. First, NPV is the most common and useful method. It provides a direct measure of...

...Investment Process
Investment:
Investment is the employment of funds on assets with the aim of earning income or capital appreciation. Investment has two attributes namely time and risk. Present consumption is sacrificed to get a return in the future. The sacrifice that has to be borne is certain but the return in the future may be uncertain. This attribute of investment indicates the risk factor. The risk is undertaken with a view to reap some return from the investment. For a layman, investment means some monetary commitment. A person’s commitment to buy a house form his personal use may be an investment from his point of view. This cannot be considered as an actual investment as it involves sacrifice but does not yield any financial return.
To the economist, investment is the net addition made to the nation’s capital stock that consists of goods and services that are used in the production process. A net addition to the capital stock means an increase in the buildings, equipments or inventories. These capital stocks are used to produce other goods and services.
Financial investment is the allocation of money to assets that are expected to yield some gain over a period of time. It is an exchange of financial claims such as stocks and bonds for money. They are expected to yield returns and experience capital...