Entrepreneurial return

The same money invested in a project with a (DCFRR) of 10 percent would, by Eq. (9-108), obtain an entrepreneurial return i = 8.37 percent on the whole investment, i.e., 8.37/ 100. Investment of the entrepreneur s own money would only achieve an aftertax return of (0.1)(1 — 0.40) = 6 percent on 50, or 3/ 100 of total investment. The incentive to the entrepreneur to manage the projeci thus corresponds to a tax-free income of 5.37/ 100 of total investment. In practice, money is borrowed from more than one source at different interest rates and at different tax liabihties. The effective cost of capital in such cases can be obtained by an extension of the above reasoning and is treated in detail by A. J. Merrett and A. Sykes Capital Budgeting and Company Finance, Longmans, London, 1966, pp. 30 8). 

Finally, a new company culture should be fostered in such businesses, by, for example, recruiting experienced entrepreneurial talent for the leadership team and building new incentive systems that match the rewards of a startup in the open market. Such systems should allocate a fair share of risk and return to the... 

As Fig. 7-4 shows, a combination of technology and entrepreneurial innovation that is truly unique to the new venture and unavailable to competitors becomes a distinctive competency. These competencies in turn create a sustainable competitive advantage. As a result of this advantage, the venture builds a surplus. Part of that surplus returns to the stakeholders of the enterprise chiefly its founders, investors, employees, and community. The remainder becomes a resource to reinvest in nurturing the distinctive... 

New ventures often succeed (eventually) if properly financed and provide handsome returns to their investors Frasch and Union Sulfur are an entrepreneurial success story. The financial support against a balance sheet that defied rational investment paid off handsomely for all concerned. After the fact, it was a brilliant investment. For many years, dividends were 100% per month. They all became rich (actually, in this case, more rich than they had been before). 

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