Capital and Business Efficiency of Small Enterprises

Stuck on Your Essay? Unlock Instant academic writing Help!

Submit a "do my essay" request and proceed to do whatever your heart desires.

Get Writing Help Now!

For Project A, the initial investment is $400,000, with expected annual cash inflows of $126,000 per year for the next four years. For these cash inflows, we applied the NPV formula, considering the firm’s desired rate of return of 8% to compute the discounted cash inflows. The present value of these cash inflows came to $417,327.98. When the initial investment of $417,327.98 is subtracted, we find that Project A’s NPV is equal to $ 0. Project A has a positive NPV. Thus, Project A will add value to Donovan Enterprises, as the total present value of cash inflows exceeds the initial cash outlay. In other words, in the four years of inflows, Project A will produce an additional $17,327.98 in value over and above the required return of 8%. Project A will generate wealth for the company, and the positive NPV suggests that this is a sound investment decision. Project A yields a positive return for the business, resulting in a positive NPV. Project A should be considered a good investment. The company is in the business of wealth creation, with a specific target of increasing value over the long term.
NPV Calculation for Project B:
The initial investment cash outflow for Project B is $160,000, followed by annual cash inflows of $52,800 for four years. Once again, under the required rate of return, the cash inflows are discounted to the present value; the present value of the cash inflows equals $174,880.30. The NPV of cash inflows is calculated by subtracting the cash outflow,, equal to the project’s starting investment of $160,000,, from the present value total of $174,880.30. This provides a positive NPV of $14,880.30. While this NPV is still positive, it is less than the NPV of Project A, suggesting that Project B creates less dollar value.
Nevertheless, Project B can still be viewed as a financial investment, as it provides positive wealth creation relative to the required initial cash outflow. This means that Project B will create wealth for Donovan Enterprises, but it will generate less wealth than Project A. The positive NPV of $14,880.30 supports that Project B is a financially viable project and operationally feasible. While the wealth creation of Project B is lower than that of Project A, an NPV of $14,880.30 means Project B will still create some value for Davidson Enterprises, just not to the extent of Project A.
NPV Decision Analysis:
Comparing the NPVs reveals that Project A has a higher NPV of $17,327.98, surpassing Project B’s NPV of $14,880.30. The higher NPV indicates that the value of the return to Donovan Enterprises from Project A is greater over time. In dollar terms, Project A creates $2,447.68 more value than Project B, confirming that the larger cash outflow for Project A is warranted due to its higher cash inflows. NPV is based on the time value of money, which means that the higher the NPV, the greater the wealth created for the company. More specifically, Project A recovers its first cash outflow and has a higher surplus of value from the cash inflows than Project B. As such, Project A is the optimal choice for maximizing shareholder wealth. The additional value adds to the potential for growth and profit of Donovan Enterprises. Based strictly on the NPV analysis, Project A is the better investment choice between the two projects.
IRR Calculation for Project A:
The IRR for Project A will be determined to be 9.931039%. This is the discount rate that makes the NPV of the project equal to zero, which can be interpreted as the rate of return the project is expected to earn. Since the required rate of return set by the company is 8%, the IRR of 9.93% is higher than the required rate. Therefore, it can be inferred that Project A will yield a return that exceeds the required rate of return. This indicates that Project A has positive investment potential, as it is expected to yield a return above the target threshold set by the company. However, while the IRR provides valuable information about the percentage return achieved, it does not address the investment size. In this case, although Project A has a lower IRR, its larger investment size and naturally higher NPV make it financially more meaningful than Project B. In essence, IRR confirms that Project A will generate an acceptable return. However, NPV will present a more actionable picture for Donovan Enterprises on the value created.
IRR Calculation for Project B:
Project B’s Internal Rate of Return (IRR) is 12.110361%, which exceeds the required 8% rate of return expected by the company. This suggests that Project B will provide a total return of 12.11%, which is higher than expected and a financially acceptable investment. IRR can be confusing, as it measures the return by percentage and relative to the amount of investment. Because Project B had a smaller initial investment, Project B has a percentage return categorized as being higher than Project A. A 12% IRR may appear more attractive than a lower number; however, IRR carries no numeric reference for the absolute value created by the project (Strielkowski et al., 2021). In other words, Project B has a higher return but generates less absolute value than Project A. So, while the IRR suggests that Project B is a good investment, it must be noted that it may not provide a more advantageous option for Donovan Enterprises when considering the total wealth created, which is accurately reflected in the NPV.
IRR Decision Analysis:
When we examine the IRR values of both Projects, we see that Project B offers the highest IRR of 12.11%, compared to Project A’s IRR of 9.93%. Because IRR tells us the profitability of an investment, IRR can be a misleading metric when comparing investments of different sizes. In this case, Project B offers a higher return percentage relative to a smaller investment. However, this does not mean that Project B has a higher overall value creation for Donovan Enterprises. Project A, with the lower IRR, ultimately creates greater total value, as shown by its higher NPV of $17,327.98. IRR can help compare investments of similar size and risk. However, it should not be used as the reason for selecting an investment, especially when the size and financial impact differ between the projects. In this case, NPV provides the best indicator for determining which investment will create the most wealth for the company. Overall, based on the examination shown above, Project A continues to be preferred despite Project B having a higher IRR.
Preferred Method and Rationale:
NPV is the most straightforward method in investment analysis, particularly when comparing multiple projects with varying scales and returns. NPV provides a clear definition of the total value created by a project, taking into account the time value of money in conjunction with the magnitude of the project. IRR can indicate return, but it does so based on the initial investment and does not show the scale of investment. IRR can provide a misleading view of the total value created when comparing projects of significantly different scales (large vs. small dollar projects) (Dobrowolski & Drozdowski, 2022). NPV considers the scale and project timing, providing a comprehensive view of the project’s future impact on profits and financial viability. Project A demonstrates the power of NPV when comparing two projects, as Project A has a larger invested dollar amount but offsets that amount with higher total returns, resulting in a larger NPV. IRR does not provide a comprehensive understanding of total wealth creation. Thus, NPV would be the preferred choice in decision-making, as it represents the most accurate representation of the investment’s impact on the company’s financial status and wealth creation for shareholders through their investment.
Final Recommendation:
Upon evaluating each project using both NPV and IRR, the report recommends that Donovan Enterprises choose Project A, which generated a revenue of $17,327.98. Project B generated a revenue of $14,880.30. Therefore, Project A creates more total value for Donovan Enterprises. While Project B generated a higher percentage (12.11%) than Project A, Project A shows a higher NPV, which leads me to believe that Project A would create more long-term wealth. Project B generated a higher IRR than Project A. The concept of IRR captures a higher percentage return. However, the size (absolute) of Project A is so much larger that it makes more financial sense to pursue Project A. NPV is a more actionable measure of wealth creation, so we recommend Project A for investment. If Donovan Enterprises chooses Project A, it maximizes its return on capital and more effectively increases its shareholder value, consequently allowing the firm to grow its overall financial picture in the future.

References
Dobrowolski, Z., & Drozdowski, G. (2022). Does the Net Present Value as a Financial Metric Fit Investment in Green Energy Security? Energies, 15(1), 353. MDPI. https://doi.org/10.3390/en15010353
Strielkowski, W., Guliyeva, A., Rzayeva, U., Korneeva, E., & Sherstobitova, A. (2021). Mathematical Modeling of Intellectual Capital and Business Efficiency of Small and Medium Enterprises. Mathematics, 9(18), 2305. https://doi.org/10.3390/math9182305

Get Professional Assignment Help Cheaply

Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?

Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.

Why Choose Our Academic Writing Service?

• Plagiarism free papers
• Timely delivery
• Any deadline
• Skilled, Experienced Native English Writers
• Subject-relevant academic writer
• Adherence to paper instructions
• Ability to tackle bulk assignments
• Reasonable prices
• 24/7 Customer Support
• Get superb grades consistently

Online Academic Help With Different Subjects

Literature

Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.

Finance

Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.

Computer science

Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!

Psychology

While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.

Engineering

Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.

Nursing

In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.

Sociology

Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.

Business

We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!

Statistics

We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.

Law

Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.

What discipline/subjects do you deal in?

We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.

Are your writers competent enough to handle my paper?

Our essay writers are graduates with bachelor’s, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.

What if I don’t like the paper?

There is a very low likelihood that you won’t like the paper.

Reasons being:

• When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
• We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.

In the event that you don’t like your paper:

• The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
• We will have a different writer write the paper from scratch.
• Last resort, if the above does not work, we will refund your money.

Will the professor find out I didn’t write the paper myself?

Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.

What if the paper is plagiarized?

We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.

When will I get my paper?

You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.

Will anyone find out that I used your services?

We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.

How our Assignment  Help Service Works

1.      Place an order

You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.

2.      Pay for the order

Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.

3.      Track the progress

You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.

4.      Download the paper

The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.

PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!