What would happen if your feasibility plan shows that your approach is not feasible?

Project instructions:
From the reading Page 183-184

RETURN ON INVESTMENT: The final aspect of the financial feasibility analysis combines the estimated earnings and the capital requirements to determine the rate of return the venture is

expected to produce. One simple measure is the rate of return on the capital invested, which is calculated by dividing the estimated earnings the business yields by the amount of capital

invested in the business. Although financial estimates at the feasibility analysis stage typically are rough, they are an important part of the entrepreneur’s ultimate “go” or “no go” decision

about the business venture. A venture must produce an attractive rate of return relative to the level of risk it requires. This risk-return trade-off means that the higher the level of risk a

prospective business involves, the higher the rate of return it must provide to the entrepreneur and investors. Why should an entrepreneur take on the risk of starting and running a business

that produces a mere 3 percent or 4 percent rate of return when he or she could earn that much in a risk-free investment at a bank or other financial institution?

Reference: Effective Small Business Management: An Entrepreneurial Approach, Ninth Edition, by Norman M. Scarborough, Douglas L. Wilson and Thomas W. Zimmerer. Published by Prentice Hall.

Copyright ? 2009 by Pearson Education, Inc.

Using a go/no go business feasibility plan we have to set an attractive rate of return to investment. Many firms establish a Target Capital Structure in the ways that management believes is

optimal to provide the best trade-off between risk and return involving different mixes of debt to equity. Corporations use their Structure philosophies to allow them to allocate risk to

READ ALSO :   Capital Budgeting

subsidiaries using risk pricing strategies.

Answer the Following: What would happen if your feasibility plan shows that your approach is not feasible?

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