The entrepreneur must decide whether to invest in the project, and if so, how to finance it: using debt or equity financing. She's to appraise the impact of the funding choices on the viability of the company, her investment yields, and the business and fiscal risks.
The case provides an opportunity for a complete FRICTO analysis of capital structure, and creates pressure by putting the pupils in a small business owner’s shoes.
Learning Objective:
Introduce basic financial concepts like opportunity cost, sunk cost, capital structure, business and financial risks, and agency issues.
Assess utility of the investment; i.e., EBIT, net income, cash flow, net present value, return on investment, break-even point, and payback period. Do sensitivity analysis based on business results that are different demonstrate how financing choices (debt versus equity) could affect the amount and variation of investment returns.
This is just an excerpt. This case is about Finance
Publication Date: 02/05/2016
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