The Concept of Present Value - Assignment Example

The monthly profits of this business seem not to be stable. In this case, the profits vary a lot through high ranges, hence showing the possibility of not remaining stable at any moment. In as much as the yearly profits show a steady increase, the monthly profits show staggering values that may make the business not that stable during the year. The gross margin of this project also shows a high monthly decrease. This shows that revenues increase but at a decreasing rate. The cost of sales also increases even as the sales increase.

Therefore, the project experienced a reduction in its net profits from 24.19% to 16.38%. There is also a staggering increase in the net cash flow as shown in the graphs. The monthly profits of the Shaved Ice Beverage project seem to be fairly stable, hence not so risky. The yearly profit for this business seems to be stable and increasing each year. The gross margin will increase in the first year, but get back to normal in the third year, showing staggering growth. Operating expenses, however, increase yearly, hence reducing the profit.

The net profit percentage, however, increases at some significant rate, hence the business is not that risky. A problem only sets in during its net cash flow where the values are very low, and sometimes go to negative. The third project, the Truck stop business, shows fairly stable cash flows throughout the year except for the first two months of the year when the net cash flow becomes too high and too low. Income received from operations, however, increases steadily year after year. The monthly profits are also very high and very stable throughout the year.

This is one significant reason that shows that this business is free from risks. However, when one looks at its net profits, it is clear that it increases in the second year, but not in a big range, then gets back in the third year. This probably shows indications of some risks in the business, but still, the project seems not one with so many risks.
The possible risk for Shaved Ice Beverage could be the fact that the business has high rates of tax and the business form. The high tax rates reduce the pretax profit to a lesser amount, hence may result in losses. The business form, where it deals in perishables, may result in a loss due to spoilage of products.