The Financial Decisions of Small Business

Evaluating the risks, calculating the probability of success, and factoring in the projected profit from sales will provide a clearer NPV to be compared with other projects in the

The management team at Savage Corporation is evaluating two alternative capital investment opportunities. The first alternative, modernizing the company’s current machinery, costs $45,000. Management estimates the modernization project will reduce annual net cash outflows by $12,500 per year for the next five years. The second alternative, purchasing a new machine, costs $56,500. The new machine is expected to have a five-year useful life and a $4,000 salvage value.

Establishing a relationship with these business owners is important as it relates to the profit and growth of the various concepts in the financial acquisition that involve participants. The overviews of these financial documents pertain to profitability that demonstrates the methodological triangulation of women-owned businesses in Florida. The study can help women-owned business to expand by using the knowledge on financial strategies to increase their business profit while improving on job growth in Florida.

* The sum of all these present values is the net present value, which equals $8,881.52. Since the NPV is greater than zero, it would be better to invest in the project than to do nothing, and the corporation should invest in this project if there is no mutually exclusive alternative with a higher NPV.

1. The net present value model handles risk by discounting expected cash flows from a project by the firm's cost of capital. This discount rate is based upon the firm's average risk level. To the extent that a project has more than or less than average risk, the use of the firm's cost of capital will not make the appropriate risk adjustments. The basic model also does not explicitly consider the variability of a project's returns.

The accessibility of businesses through social media and the web have made many entrepreneurs able to reach consumers throughout the world they would otherwise not be able to do business with. Women have often found themselves underperforming in the workforce and as traditional small business owners in comparison to similarly employed or self-employed men (Huarng et al., 2012). However, there has been little research investigating the extent to which these new social media, web, and digital marketing technologies and their strategies benefit women entrepreneurs of already profitable small businesses in comparison to men who employ similar strategies. A descriptive quantitative study is needed to investigate the use of social media, web, and digital marketing technologies in the businesses of successful women entrepreneurs in comparison to similarly successful men entrepreneurs by studying the effects of their digital strategy by concentrating on their digital analytical data on similar digital and social media platforms and measuring that data. This study plans to provide data that will help determine whether profitable small businesses are effected by gender on the Web 2.0 and help close the gender gap.

To calculate the NPV ( Net Present Value) we discount the cash flow at the given discount rates

A net present value calculation is based on the principle that future cash flows are not worth as much as present day cash flows, because inflation devalues those future flows (Investopedia, 2012). This implies that there are a number of factors that influence the NPV analysis. For a given project say a hypothetical new factory many different factors will need to be taken into consideration.

A more accurate measure for considering whether or not to accept a project is its net present value. It is not without flaw, as any deviation from forecasted amounts will alter the NPV. NPV assumes that cash flows generated from the project are reinvested at the company's required rate of return, rather than the IRR. This provides a more realistic measure of how a project will affect the firm while providing a dollar amount, rather than an unreliable percentage. In comparing the evaluation methods, we feel NPV is the most appropriate for this case.

Quality control represents the act of analyzing processes and monitoring operations to ensure that high quality standards are being met at all times. There are many statistical models that can be employed to ensure that the organizations operational objectives are being met. Furthermore, with the advantages of modern technology, these tools can also be used in a real time manner to monitor the quality on a perpetual basis. This can serve as the foundation in which management can try to minimize any operational problems as they occur as well as mitigate the likelihood that the same errors will occur in the future. In many cases simple statistical tools such as scatter plots, control charts, flow charts, histograms and many others can help the organization find the root of the quality problem quickly.

Net Present Value (NPV) calculates the present value of the cash flow which is based on the opportunity cost of capital and comes up with a value that is added to the wealth of the shareholders if that project is accepted.

NPV shows the difference between an investment’s present value of costs and its present value of benefits, and is calculated using a market-based discount rate. This valuation requires estimating the size and timing of all the incremental cash flows from the project. The NPV is greatly affected by the discount rate, so selecting the proper rate–sometimes called the hurdle rate–is critical to making the right decision.

NPV is a popular method to evaluate the investment decision of a new project. Most of the managers are most likely to use NPV for investment decisions. Whether, company invests in new project or improving the existing business process to achieve financial objectives of an organisation. Such as Randolph Mining Company have an extensive experience in mining industry. Still it is not easy to make a quick decision to built up the site or selling the right to the competitors with immediate benefit. In this situation, various analysis tools are more appropriate to better judgement of project. However, NPV is one of the most appropriate tool to predict possible future cash inflows from the project. It provides the time value of money components within the estimated project period. Therefore, director’s can easily make a decision based on positive cash generation from the desired project period.

We will determine the viability of the investment using the Net present value method. It will also help to estimate the costs that will be incurred in the future and the benefits that business will get. We choose this method because it shows actual benefits and takes into consideration time value of money ( Baker and Powell, 2000)

I hereby declare that this project work was personally carried out by the researcher for the award of Higher National Diploma in Accountancy Studies. I declare that this is a genuine work that has never been published in whole or in part for any certificate.