Capital Appraisal Techniques for Dell Inc's Investment Project

ACC511- Managerial Finance

Executive Summary
The aim of this report is to evaluate the investment project considered by Dell Inc
through using capital appraisal techniques. Dell Inc wants to establish the manufacturing plant
for laptops in new region and wants to know whether project will successful or not. Results
gathered through applying the capital investment techniques has shown that it is good to make
investment in new project as it has positive NPV and higher IRR as compared to cost of capital.
The cash flows generated by the project are enough to pay for the annual loan installments.

Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Solutions to question 1: Application of capital investment techniques...........................................4
A) Yearly Depreciation Expense.................................................................................................4
B) Yearly cash flows associated with the plant from year 1 to 9.................................................4
C) Cash flows associated with year 0..........................................................................................5
D) Cash flows in year 10..............................................................................................................6
E) NPV of the project...................................................................................................................6
F) IRR and Payback Period..........................................................................................................6
G) Discussion on project specific risk.........................................................................................7
Solutions to question 2: Project evaluation on whether it meets the requirement of annual bank
installments......................................................................................................................................8
2. A: Answer to memo question...................................................................................................8
2. B: Feedback..............................................................................................................................8
Conclusion and recommendation....................................................................................................8
References........................................................................................................................................9