Question
Assume the innovators expected to invest an initial capital investment of $ 300 000 in the PillCam project at the beginning of the project, followed
Assume the innovators expected to invest an initial capital investment of $ 300 000 in the PillCam project at the beginning of the project, followed by a cash outflow of $ 20 000 for the in the first years. The PillCam project was expected to generate $ 50 000 in the first year, $ 80 000 in the second year, $ 110 000, in the third year, and $ 130 000 in the fourth year. The $ 300 000 was raised at the cost of 8%. On the other hand, the innovators were faced with another investment option to invest in a project that needed a once off initial capital investment of $ 150 000 that will generate a yearly cash inflow of $ 40 000 for the first 2 years, $70 000 at the end of the 3rd year, and $90 000 at the end of year 4. The initial investments cost of capital is 6%. Use the discounted cashflow analysis using the Net Present Value to evaluate the two projects and comment whether the innovators made a right choice to invest in the PillCam project over the other project. You comment must consider both the financial and non-financial perspective of the decision as well as the payback period of the project.
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