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Finance Concepts - Assignment Example
Author : cdouglas
Finance & Accounting
Pages 4 (1004 words)
Finance Concepts Name Hamid Assar Business Finance FIN 100 Finance Concepts 1. Opening up a small business is a risky venture and requires diligent assessment and analysis beforehand. As a small business owner there will always be limitation of finances…
If the estimated life of this project is 5 years and the Required Rate of Return is 10%, then we can also calculate the NPV of this project. If the NPV is also a positive value then we can safely estimate that this project will carry a good return, and the initial investment would be covered in 5 years. (Shim & Siegel, 2000). 2. Whenever one wants to finance a business, he can go for either debt or equity financing. Debt Financing carries lots of advantages and disadvantages. The major advantage of this form of financing is that you do not lose the ownership of your company. The lender also does not have any sort of share in the future business profits. Moreover, the interest on debt is deductible on the tax’s returns, hence reducing the actual cost of loan to the company. Finally, in the case of debt financing the company is not entitled to send their annual reports to various stakeholders. However there is always another side of a coin. Debt Financing carries the disadvantage of at being repaid at some point in time. ...