Business Plans Investment Decisions

An Analysis of Three Business Plans in Regards to their Riskiness

This paper will examine three separate business plans and rate these plans based on the level of risk and the cost of capital that should be awarded to these plans. Of the three plans considered, a plan for an expansion of a coffee production facility in South America carries the least risk. An investment opportunity for a truck stop in Texas was estimated to carry slightly more risk but to be a relatively solid investment. Finally, an investment opportunity in a marketing company that targets high-tech firms and provides marketing services for firms who wish to enter foreign markets was recognized as the riskiest investment although it also has the highest potential rewards.

Acme Consulting

Acme Consulting involves a proposed business that specializes in a fairly focused niche (Palo Alto, N.d.). The organization will focus on the marketing of high-tech products in foreign markets. This niche is not well developed and many organizations do not have the internal resources available to actively market their products in international markets. The company intends to specialize...

Their target market is intended to be small and medium size enterprises (SMEs) as well as larger corporations. The company believes that it can earn revenues of $159,000 its first year and grow them to $289,000 by year three of operations.
Despite the opportunities that may lie in this business plan, there is significant risk to this proposal primarily due to the fact that the company is untested, based on professional service, and is intending to operate with a relatively slim net profit margin. Therefore, any deviation from the original business plan could result in financial hardship for the company. However, at the same time there is also significant potential to generate huge returns on investment. This seems to be a high risk and high reward strategy that should be pursued with a cost of capital rate of roughly fifteen percent.

Interstate Travel Center

Interstate Travel Center will represent a major travel center in Dallas, TX (Bplans, N.d.). The truck stop will target NAFTA trade as well as the local Dallas market. The management team will consist of a married couple who have business experience but…