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The Investment Detectives

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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%

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