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Guillermo Investment - How to evaluate investment

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Suppose Guillermo invested in high end office furniture's. How would you determine the cost of the project? How would you determine the cash flows from the project? How might you use the cash flow to calculate the value of the investment? What costs would you not consider, and why?

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Solution Summary

Brief discussion on how I would go about accumulating the details to evaluate the project.

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Suppose Guillermo invested in high end office furniture.

How would you determine the cost of the project?

I would see what equipment and tools I would need to buy in order to produce high end furniture. I would see if I needed to buy a new building to create the new furniture in and any up-front fees needed to get into the business (license fees). All the initial outlays of money to get started, including test runs of all the new equipment, would be the initial cost of the project. Think incremental cash outlays!

How would you ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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