In the New York Times article, Paul Sullivan delves into the concept of Angel investing. He defines the concept as investing in start-up companies. In all, the article discusses important concepts in business finance.

The distinction between an investor and a gambler is one of the key concepts in the article. Both engage in risk taking but an investor only makes calculated risks. This distinction is very relevant for the study of finance in the current course.

In addition, the author notes that an angle investor should seek to invest in a portfolio of businesses with each taking at least $ 25,000. This is also a very relevant concept for the study of finance given that diversification reduces risks in investments.

Also discussed in the article is the need for an angle investor to seek annual returns of at least 25%. Again, the idea of returns is important for the current study of finance. Businesses rely on the concept in making capital expenditure decisions. It is on this basis that a business will only invest on projects promising the required rate of return.

Lastly, the author also discusses the mode of investing. In first place, one can become an angle investor by themselves. The paper, however, acknowledges that this can be problematic as the individual may not have the necessary time to conduct research. This revelation mirrors information asymmetry problem which is very relevant for the study of finance. The second mode of investment advocated by the author is for angle investors to join a group.

Q5

Sunk costs are a concept used in capital budgeting decisions. In the context of capital budgeting, they represent costs that have already been incurred and which are not relevant in evaluating the viability of a project.

Reference

Sullivan, P. (2014, May 4). Billions Not Required for Angel Investing. The New York Times.        Retrieved from http://www.nytimes.com/2014/05/03/your-money/angel-investors-need-a-   high-risk-tolerance-not-billions.html?src=me&_r=0

 
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