Final project week 3: investing and financing activities; interim
The two largest investing activities for each firm will depend on the particular business. Generally speaking, some of the most common investing activities include buying property or equipment, making capital investments into new projects, and purchasing long-term assets such as stocks or bonds. Financing activities can range from issuing debt to taking out loans to raising additional capital through equity offerings.
In terms of size, these will vary by company depending on their financial situation and strategic goals. For example, a retail store may have larger investments in property while a tech startup may focus more heavily on venture capital funding. Ultimately, it is important for companies to assess their individual needs and available resources when determining which type of activity would be most beneficial for achieving their desired objectives. NPV is a measure of profitability and indicates whether or not the project would be profitable to pursue. The risk assessment can impact how the project’s Internal Rate of Return (IRR) is interpreted. The IRR is calculated as the discount rate that makes the projected NPV of a project equal to zero. Therefore, if there are higher levels of risk associated with a project, then it will require a higher rate of return to justify investing in it; this means that an IRR for a high-risk project may appear lower than what an investor might otherwise feel comfortable with in terms of expected returns from an investment. This highlights why it’s important for investors to consider both the NPV and IRR when evaluating projects, as well as potential risks associated with them, as these factors all help determine whether or not they should invest in them
For example, suppose that there are two identical projects but one has higher associated risks than another – thus resulting in different NPVs and IRRs. In this case, even though their respective IRRs are similar on paper, investors must still carefully assess each one based on its underlying risk profile before deciding which is more worthy of investment capital.