Hart Venture Capital $($HVC$)$ specializes in providing venture capital for software development and Internet applications. Currently HVC has two investment opportunities: $(1)$ Security Systems, a firm that needs additional capital to develop an Internet security software package, and $(2)$ Market Analysis, a market research company that needs additional capital to develop a software package for conducting customer satisfaction surveys. In exchange for Security Systems stock, the firm has asked HVC to provide $$590,000$ in year $1,$ $$590,000$ in year $2,$ and $$260,000$ in year $3$ over the coming three$-$year period. In exchange for their stock, Market Analysis has asked HVC to provide $$510,000$ in year $1,$ $$360,000$ in year $2,$ and $$410,000$ in year $3$ over the same three$-$year period. HVC believes that both investment opportunities are worth pursuing. However, because of other investments, they are willing to commit at most $$800,000$ for both projects in the first year, at most $$700,000$ in the second year, and $$500,000$ in the third year.

HVC$\text{'}$s financial analysis team reviewed both projects and recommended that the company's objective should be to maximize the net present value of the total investment in Security Systems and Market Analysis. The net present value takes into account the estimated value of the stock at the end of the three$-$year period as well as the capital outflows that are necessary during each of the three years. Using an $8\%$ rate of return, HVC$\text{'}$s financial analysis team estimates that $100\%$ funding of the Security Systems project has a net present value of $$1,810,000,$ and $100\%$ funding of the Market Analysis project has a net present value of $$1,610,000.$

HVC has the option to fund any percentage of the Security Systems and Market Analysis projects. For example, if HVC decides to fund $40\%$ of the Security Systems project, investments of $0\mathrm{.}40($$$590,000)=$ $$236,000$ would be required in year $1,0\mathrm{.}40($$$590,000)=$ $$236,000$ would be required in year $2,$ and $0\mathrm{.}40($$$260,000)=$ $$104,000$ would be required in year $3.$ In this case, the net present value of the Security Systems project would be $0\mathrm{.}40($$$1,810,000)=$ $$724,000.$ The investment amounts and the net present value for partial funding of the Market Analysis project would be computed in the same manner.

Managerial Report

Perform an analysis of HVC$\text{'}$s investment problem and prepare a report that presents your findings and recommendations.

Solution and Net Present Value

What is the recommended percentage of Security Systems that HVC should fund? $($Round your answer to two decimal places.$)$

$\%$

What is the recommended percentage of Market Analysis that HVC should fund? $($Round your answer to two decimal places.$)$

$\%$

What is the net present value $($in dollars$)$ of the total investment? $($Round your answer to the nearest integer.$)$