Discuss this startup using npv and make a recommendation

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Reference no: EM133303304

Your portfolio manager has asked you to analyze 3 different potential startups and make recommendations: For Startups 1 and 2: required rate of return is 20%. If the company can't afford both startups, which one should they embark on?

Startup 1: $50K initial investment, with net cash inflows of $15K for year 1, $25K for year 2, $30K for year 3, $20K for year 4, and $15K for year 5.

Startup 2: $75K initial investment, with net cash inflows of $20K for year 1, $25K for year 2, $30K for year 3, $40K for year 4, and $45K for year 5. (Note, Startup 2 involves purchasing equipment with more capability, which will cost more. However, with this added capability the company expects to generate more revenue in the out years)

For Startup 3: Your company leadership is really interested in this startup, so they've relaxed the required rate of return to 15%. $50K initial investment, with net cash inflows of $5K for year 1, $15K for year 2, $20K for year 3, $20K for year 4, and $15K for year 5. Discuss this startup using NPV and make a recommendation.

Reference no: EM133303304

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