Chelsea football club-investment appraisal, Business Economics

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Chelsea Football Club

a) Reasons could include: the probable for CFC to return healthy profits; CFC may have been undervalued at the time of purchase; Abramovich could simply be a big fan of the club, i.e. personal interest.

b) There is no assurance that CFC would become profitable; Abramovich had invest a lot of his own money on the club; CFC were suffering from 'huge financial losses' so Abramovich is taking a risk by investing in such a business; the club was not approximate to break-even until some 7 years after Abramovich took over the business.

c) Definition of payback period; It would inform Abramovich how long it would take (as an estimate) before his spending on the club would generate sufficient income to pay back the value of the investment; a shorter payback period would tend to decrease the risk of such an investment project. Ultimately, it acts as a decision-making tool for risk evaluation.

 


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