1. foundation of finance.

Added on - 19 Sep 2019

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FOUNDATION OF FINANCEINVESTMENT APPRAISAL
1The assignment will contain the various techniques which are employed in the investmentappraisal and will help the XYZCompany to select the best proposal among the given fiveproposals. Further, the best-proposed project will be given so that the company can use in orderto attain the sustainable competitive advantage. Then the assumptions will be given further in theassignment on which the decision will be based on the selection of the proposed project for theXYZ Company.The main techniques that are employed in investment appraisalNet present valueThe net present value of an investment or the project shows the degree to which revenue or thecash inflow exceeds or equals the amount of capital investment which is needed to fund it.Further, the organizations use the net present value as a measure of comparing the profitability tomake sure that the most economic ventures are influenced. Also, the greater net present valuedemonstrates the investment or the project is more profitable (Horngren et al., 2013). Accordingto the net present value, the proposal D will be more suitable and profitable for the XYZCompany because the NPV is £726,487.4 which is much higher as compared to other fourproposals which have the values £150,092.2, £119,535.2, £126,759, £433,863.7 respectively.Therefore, it can be clearly understood that on the basis of the net present value, proposal D willhelp the XYZ Company in order to maximize the profitability and achieving the sustainablecompetitive advantage.
2Figure1Payback periodThe payback period is defined as the length of the time which is needed in order to recover thecost of the investment. Further, the payback period of the provided project or investment is thesignificant determinant of whether to consider to project or not. Moreover, the payback periodsare not considered desirable for the positions of the investments. It completely ignores the valueof the money. The payback period doesn’t represent the exact image of the company when itcomes to appraising the project’s cash flows (Horngren et al., 2012). According to the result ofthe payback period for the each proposal. It can be clearly said that the proposal A is the mostsuitable one for the XYZ Company as compared to the other proposals because the value of thepayback period is 1.9 years. Further, the value of other proposals is 7 years, 3 years, 2 years and3.5 years respectively. It can be clearly seen that there is no such difference between the valuesof proposal A and proposal D. Therefore, the company XYZ can also use the proposal D insteadof proposal A.
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