Question

Give an example of a personal purchase or a small business investment venture. 

Do you think that you made a good investment of your hard-earned capital? 

Could the capital budgeting techniques in this lesson have helped you with the decision?

Answer 1

I want to establish a small business with lower capital that is, "Children play and adventure area".

Children want to play outside with freedom so I will set up a small venture that will be dedicated to younger kids where they can play, explore and do adventurous activities. It will be safe for kids, parents can leave their kids for sometime. It will be a paid service on hourly basis, weekly, weekend, monthly and annual subscription also.

Yes, I think, I made a good decision, this business will require lower capital, capital will be required for setting up the space and maintain it.

Yes, Capital budgeting techniques will really help me in this business, I can use "Net present value" in which I can calculate the present value of cash inflows and outflows and can make the decision on approval of project on the basis of positive NPV.

I can also use "Payback period" method in which I can calculate the length of time within which, I will start getting cash inflows and profit.