ACC00152 Business Finance Assignment 2022

Running head: ACC00152 BUSINESS FINANCE
ACC00152 Business Finance
Name of the Student:
Name of the University:
Author Note

1ACC00152 BUSINESS FINANCE
Table of Contents
Memorandum.............................................................................................................................2
References and Bibliography:....................................................................................................5

2ACC00152 BUSINESS FINANCE
Memorandum
The Directors
Space Sky Flight Ltd
Subject: Evaluating three different options for the Directors
The main attribute of the overall assessment is to identify the viable investment option
presented for Sky Flight Ltd to improve their returns from investment. The calculations
would relatively help in understanding the best possible projects that could be provided to the
organization for improving their future profits. Three different types of scenarios has been
analyzed by utilizing the investment appraisal technique such as (NPV) Net Present Value, as
it helps in understanding the current value of the overall cash flows that would be generated
in future. Baum and Crosby (2014) indicated that NPV is considered an appropriate
investment appraisal tool that allows companies to detect the best possible investment option,
as time value of money is considered while calculating the benefits provided from a particular
project.
Option A: Manufacturing the product “in-house” and selling directly to the market
NPV-Option A Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales 440 385 440 240 90
Variable cost 180 158 248 135 68
Fixed production costs 11 11 11 11 11
Marketing costs 8 8 8 8 8
Depreciation 60 60 60 60 60
Rent (Income Cost) 7 7 7 7 7
EBT 175 142 107 20 -63
Tax 52 43 32 6 -
EAT 122 99 75 14 -63
Cash Flow 182 159 135 74 -3
Equipment cost -300
Salvage value 75
Accounts receivable -110 -96 -110 -60 -23