Jaguar Plc

The present value of the project is US $1.3 million. Currently, he can raise US $ 650,000 by pledging his personal assets.

• From the NPV perspective this is a good project to invest in with the current bid price. The current bidding situation has made it more competitive. That means the more he can bid, the better would be the chances to get the business. At the same time he is increasing his personal financial risk and approaches the max limit that he can borrow.

The reasons are:

1) He is a successful entrepreneur and has a good experience in the current industry. He can also do the thing on his own without his current partner. He has the expertise and his staff’s support to carry on the business.

2) The project has Net Positive Value. It is a growing business which is going to yield positive returns. This will help him pay his debts very quickly.

3) As a general practice, the project bid price is 10 times the net income after taxes. For the year 1998, this amount is US $ 805,770, which is1.3 times larger than US $650,000.

4) He is emotionally attached to the project.

5) Once he owns the company, extra cash requirement is financed by bank against the available business cash (100 % of cash) and Account receivable (75 % of Account Receivable).

In my personal opinion, he needs to further raise the bid price which should be

$750,000. These are some ways that he can raise the additional amount.

• The additional money can still be borrowed against