Operation of Nascenia IT

Abstract

Software and IT service industry in Bangladesh has crossed a long road over the last few decades. According to BASIS survey, there are over 800 registered software and ITES companies in Bangladesh. The total industry size is estimated to be around Tk. 1,800 crore (US$ 250 million). Approximately 30,000 professionals, majority IT and other graduates, are employed in the industry. The presence of high number of young entrepreneurs is one of the distinctive features of this industry. Nascenia IT is an award winning Software Company led by such a young entrepreneur and working for European and North American clients. They build cloud based web and mobile applications. In this report, I have shown various capital budgeting techniques and its implications in the project evaluation of Nascenia IT. An efficient allocation of capital is the most important finance function in modern times. It involves decisions to commit firm’s funds to long-term assets. Such decisions are tend to determine the value of company/firm by influencing its growth, profitability & risk. Splacer is one of our clients with five years of contract. In the first year, we will have to build website for them and in the subsequent four years, we will have to perform the maintenance of the website. In these years, if any changes are required by the system, we the Nascenia team will have to work accordingly. Every organization has pre-determined set of objective and goals, but reaching those objectives and goals only by proper planning and executing of the plans economically. Nascenia has its own set of goals and objectives. It has some fixed criteria to be fulfilled, in order to select the project. In the capital budgeting process, Nascenia mainly emphasize on the Net Present Value technique and the Profitability Index. But still, it calculates Internal Rate of Return, Payback period and Discounted payback period. The project Splacer has been accepted as it has positive (by a safe margin) net present value. It has a high profitability index of 2.86. Payback period and discounted payback period are 1.03 and 1.034 years respectively. The Internal Rate of Return of the project Splacer is also very high compared to the industry average and the company standard. The project Splacer is accepted from all possible techniques of capital budgeting.