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We must create a manual to know how to evaluate a company project -How to determine...

We must create a manual to know how to evaluate a company project


-How to determine the initial investment of a project?

-Sales forecast?

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Answer #1

Evaluating a project's initial investment

To evaluate if the project worth investing or how much at maximum can be invested in a project will be decided on the basis of comparing the initial cost with sum total of discounted cash flows that can be arised from the project from year to year. If the sum total of discounted cash flows is greater than the initial investment of the project, the project is expected to bring profit's to the investors or vice versa

For eg. Lets assume the project needs an initial investment of $1M and the expected cash flows are $100000 for the next 15 years. To take a decision regarding the investment we have to compare the discounted sum of $100000 for the next 15 years with the initial investment.

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