Economic Feasibility - an overview

Running Head: Economic Feasibility 1
Economic Feasibility
Student Name
2/3/2020

Running Head: Economic Feasibility 2
Problem 1
Net Present value shows the present cash within the project. The net present value
of e-commerce website is positive. It shows that there are enough cash in the project
because the Net Cash Flow for the year is $ 85,095.96. Therefore, it shows that the
overall flow of cash is good in the project(Marchioni, & Magni, 2018)
The overall return on investment is calculated by dividing present value of net
cash flow with the initial investment. The return on investment is the discount rate at
which the net present value arises to be zero. Here the present value is 85096 and initial
investment is 50000. Therefore, Return on Investment is 170.19%. It shows that the
returns are good. The return of investment is worthy full and satisfied (Smit & Trigeorgis,
2017)
The break-even point occurs when both cash flows that are cash out flow and cash
inflow meets at a point. The break-even situation is that where there is no profit and no
loss. In this the break-even occurs in 1.37 Years. In the first year there was negative
incremental cash flow and break-even occurs between the 1st and 2nd year(Smit &
Trigeorgis, 2017)
The graphical representation is an important tool and makes the clear
understanding of every analysis. The graph of e-commerce project shows a positive side
and increment. The graph is increasing and will have more earning in future. The break-
even point was at 50000 and in between 1st and 2nd year. The graph also represents that
there are more total cash flows in the year compare to total cash outflow. Therefore, it is
a positive sign for the e-commerce website to do business. Therefore, in order to analyze
the graph of breakeven point it has been analyzed that the company will face breakeven
point between the years of 1 – 2 after which the cash inflow of the company will increase
that showcase the positive sign for the company to grow in the market. Any project,
business can be called as good and positive where the inflows are more than outflows.
Also, the inflows are increasing with the year (Marchioni, & Magni, 2018)