MY STUDENT RESEARCH - HOME



RUNNING HEAD: PHASE 4 INDIVIDUAL PROJECTKENNETH C HOLMESFINC615-1504A-02PROFESSOR EDWARD HARTMANNOCTOBER 28, 2015NPV AND IRR FOR EXPANSION PROJECTIntroduction:To finalize the plans for APIX’s expansion into food packaging, APIX requires the project specifics to calculate the NPR and IRR, to determine the feasibility of the expansion project. The auditing firm representing APIX has determined the parameters for the calculations, and the time has come to make the final decision to proceed or not. The following document contains the calculations and recommendations. IRR and NPV:Project parameters CITATION Edw153 \l 1033 (Hartmann, 2015):WACC: 10%Initial investment: $30 mill (equipment $25 mill, net working capital (NWC) $5 mill)Life of project and equipment: 5 yearsSales/Revenues: $25 mill per year for 5 yearsGross profit margin: 60% (not including depreciation)Depreciation: Straight line, for tax purposesSG & A: 10% of salesTax rate: 35%Chart provided by CITATION Edw153 \l 1033 (Hartmann, 2015).Recommendations:Based on the parameters of the project, the WACC of 10% is the baseline, and all other figures must be above 10%. The NPV of $10,538,626 is well above zero (0), and the IRR of 22.19% is well above the WACC. Just based on the IRR and NPV, the project will be a profitable venture and a go for APIX. Another avenue of funding for APIX to consider would be venture capital which includes: private equity, venture capital, and angel investors. For starters, venture capital refers to funding provided by a third party for high growth start-ups and middle market businesses. The first is private equity (PE), where the funding is provided by private investors or private equity firm, and the funds are used to pay for expansion, or just a private investment. The second is venture capital (VC), where the funding is used to pay for projects, and expansion for start-ups with large growth potential, as well as middle market businesses. In addition to cash, they provide expertise in business planning, and guidance to help the business prosper. The third is Angel investing, where the funding comes from very wealthy private investors, and their goal is to obtain high returns on their investment, particularly with startup businesses. They can also act as venture capital CITATION Car15 \l 1033 (Beesley, 2015). Conclusion:The project would definitely prove profitable and worthwhile for APIX to pursue. Regarding alternative funding sources, the best option for APIX would be venture capital firms. Many of these firms specialize in middle market leveraged buyouts and growth equity, but they also participate in structured equity investing. They also invest in both control and non-control positions. They provide many services from business, networking, and investment strategy expertise. There are many venture capital firms that invest with fashion designers, large restaurant chains, tech firms, and a host of other industries. They are particularly popular with the technologies sector. Venture capital firms are found globally, and will invest in companies around the world CITATION NA1547 \l 1033 (N.A., 2015).The benefits of using venture capital for APIX are many including: There is no need to comply with SEC securities guidelines pertaining to issuing stock, but the partner would be provided access to APIX financial; Anonymity would be protected; APIX would not have to give up control over decisions, but would partner with the investor over decisions; and the return on their investment would be agreed upon in contract.REFERENCES BIBLIOGRAPHY \l 1033 Beesley, C. (2015, September 3). Five Tips for Finding and Securing Private Investors for Your Start-Up. Retrieved from Small Business Administration: , E. (2015, October 28). Learning materials: Phase 4 IP spreadsheet. Retrieved from CTUonline.edu: campus.ctuonline.eduN.A. (2015). Venture Capital Firms | Assets, Investment Size, Location. Retrieved from Find The Company: venture-capital-firms. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download