VENTURE CAPITALIST

1
VENTURE CAPITALIST

• Cash flows of companies

2
PVC, PVB, and NPV

• MARR20
• Diamonds
• PVC 400 1,000/1.2 1,000/(1.2)2 1,928
• PVB 1,000/(1.2)3 4,000/(1.2)4
  19,000/(1.2)5 10,143
• NPV PVB - PVC 10,143 - 1,928 8,216
• PVB/PVC 5.26
• Similar for Hedge fund, Dantist soft.,
  Subway

3
COMPARISON PVC/PVB and NPV

• Comparison of NPV and PVB/PVC leads to the same
  conclusion Hedge fund is the best project .
• Comparison of project with PVB/PVC is equivalent
  to the IRR analysis when there is only one time
  interval. However, for multiple cash flows
  comparison of PVB/PVC may conflict with the IRR
  analysis.

4
INCREMENTAL ANALYSIS WITH ?ROR and ?PVB/?PVC

• Incremental ?ROR and ?PVB/?PVC analysis is
  equivalent to NPVs analysis
• Prioritized according to PVC
• Incremental cash flows

5
INCREMENTAL ANALYSIS WITH ?ROR and ?PVB/?PVC
(contd)

• Dentist soft.- Subway ?ROR97 MARR20 or
  ?PVB/?PVC 1
• Dentist soft. is preferable to Subway
• Hedge fund - Dentist soft. ?ROR917 MARR20
  or ?PVB/?PVC 1
• Hedge fund is preferable to Dentist soft.
• Diamonds - Hedge fund ?ROR or ?PVB/?PVC 1
• Hedge fund is preferable to Diamonds

6
PVC-PVB GRAPH

• Hedge fund is the most preferable alternative
  with the highest present value