Perform investment appraisal and draw conclusions

 Airbnb Inc. is a web-based company that provides a digital marketing platform for job rentals, homestays, and lodgings. Other tourism activities are also available through the portal. Airbnb is a publicly traded company whose stock is traded on the NASDAQ. As of 2021, the corporation's asset base stands at $ 10.491 billion. With more than 5.9 million listings worldwide, the company faces stiff competition from companies like luxury travellers, VillaDirect, Third Home, and Luxury Rentals. Booking.com, Expedia, and so on.

Because it operates through a website and mobile applications, Airbnb Inc does not require a lot of capital. Business acquisition investments have been one of Airbnb's most profitable business strategies. Accoleo, based in Germany, and Crash Pander, based in London, were both major purchases. The corporation's stock market listings increased by 20% as a result of this significant investment. The company's most recent acquisition was in 2019, when it purchased urban door, a company that specialised in extended stays for corporate clients.

This study looks into evaluating the viability of a potential investment opportunity, namely the acquisition of Couchsurfing, which is ranked under the Budget traveller category and provides a social networking and hospitality exchange service. Airbnb's listings are expected to grow by over one million as a result of the suggested investment opportunity. This potential will necessitate a $ 13 billion investment/initial cash outlay. The most recent valuation is used to determine the investment requirement/cost.

In 2020 and 2019, Airbnb Inc's operating cashflows were close to $ - 629,632,000 and $ 222,727,000, respectively. The decrease in operating cash flows was attributed to the Covid 19 outbreak, which resulted in border closures, reduced travel, and the purchase of vacation homes. Another factor contributing to the decline was the rise in website maintenance costs, such as the interest paid on additional data.

Airbnb Inc. generated $ 79,590,000 in cash flow from investing operations in 2020, compared to $ - 347,15,000 in 2019. 2020 is expected to be better than the previous year. The sale of some of the company's fixed assets resulted in an increase in revenue.

According to the company's annual reports, cash flow from financing activities was $ 2,940,814,000 in 2020 and $ 854,579 in 2019. The year 2020 is expected to be better than the previous year. The company's IPO (Initial Public Offering), which allowed it to raise $ 3 billion in new capital, was the primary reason for the increase. A $1.9 debt was also issued, which helped to improve cash flow. The repayment of the $5,000 loan had no significant impact on the company's financial situation.

Airbnb's net cashflows were $ -667, 103, implying that any investment opportunity the company considers must generate cash flow that improves the company's current cash flow position.

Forecasting cash flow for a specific investment

Ascertain that the initial capital expenditures/outlay will generate sufficient future cash inflows to be considered viable in an investment evaluation. The steps for calculating the cash flow of an investment are as follows:

The most crucial aspect of investment evaluations is cash flow estimates. It must increase the company's value to be considered an effective investment opportunity or decision. The initiative is expected to increase the company's financial inflows as a result of this. As a result, the above-mentioned Airbnb acquisition faces the challenge of estimating future cash flows, which includes determining how much money it will cost to acquire a new company as well as determining whether or not the acquisition adds value to the company. As a result, it's clear that estimating future cash flows is an important part of the investment evaluation process. There are additional cash flows as a result of the Investment project's implementation, which are referred to as incremental cash flows. All cash flows that occur after that point are referred to as incremental or additional cash flows. Time zero is the point in space where the investment is made, and all cash flows that occur after that point are referred to as incremental or additional cash flows. The company's incremental cash flow is calculated by comparing the company's cash flow with and without the new investment. The difference between the two generates cash flows. To account for the time value of money at the time they occur, adjustments are made to the expected future cash flows. When comparing future cash flows to current cash flows, the discount rate is used. As a result, Airbnb must discount both real and nominal cash flows at the current or supplied discount rate. Airbnb has the ability to forecast all future cash flows in nominal terms. The discounting rate is used to account for inflation, which has a direct impact on purchasing power and the size of expected cash flows. The investment appraisal process comes to a close with the decision criteria. The selection criteria differ depending on the investment appraisal method used. compounded. As long as there is a net difference between future cash inflows and current cash outflows, investment opportunities with a positive Net Present Value should be pursued. The general rule of thumb when using the payback period investment appraisal approach is to choose the investment opportunity with the shortest repayment period. As a result, the company's initial investment will be quickly recouped. The return on investment (ROI) can be calculated in two different ways: ARR and IRR (IRR). The financial benefits that the project is expected to bring in are listed below. Airbnb should only invest in opportunities where the IRR exceeds the current cost of capital when using this method. If the decision criteria are not met using the procedures above, such as having two projects with equal NPVs, this step is required. As a result, the benefits of each option, i.e. benefits other than massive cash flows, must be assessed. These benefits include the ease with which the investment can be implemented, as well as the positive impact on the community.