Page 92 - merged.pdf

•72 The 100 Greatest Business Ideas of All Time

• Using a similar cashflow you could examine a project to invest in buying a
property for you to rent out to tenants.

• How do you compare the performance of equity shares in a personal portfolio?
If you simply look at capital growth you will be biased towards companies that
have enjoyed growth irrespective of whether they have also produced dividend
return. You will also find it difficult to make comparisons if you have bought
shares at different times or added to the holding of one share during the period
you are trying to compare. The answer is the DCF technique. An example of
holding BP shares over a period of time is shown in Appendix 2.

Imagine if unit trust managers Idea 25 had to publish their real results in such terms.
Might not the consumer get a very different opinion?

Ask yourself

• Do you really understand discounted cashflows? If not do some more work
on it.

• Somewhere in your working environment someone will be using investment
appraisal techniques that affect you. It might be the finance department in
your own company, or your suppliers, or your customers. It might even be
the people who are planning your pension, i.e. the people who are respon-
sible for how poor you are going to be in your late old age. Find out how
they do it.

So how, after all this learning, did George fare? He sat down with the sales director
and worked out the likely benefits of the new stock control system. The main benefit
of course was rather intangible, i.e. difficult to put a number to. It related to the fact
that if the system were better there would be fewer stock outs and therefore they