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Business Decision Making: Investment Appraisal Techniques and Tesco's Performance

   

Added on  2023-06-18

13 Pages2063 Words251 Views
Business Decision Making
Business Decision Making: Investment Appraisal Techniques and Tesco's Performance_1
Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Task 1...............................................................................................................................................1
Question 1 A...........................................................................................................................1
Question 1 B...........................................................................................................................4
Question 1 C...........................................................................................................................6
Task 2...............................................................................................................................................6
Question 2 A...........................................................................................................................6
Question 2 B...........................................................................................................................7
Question 2 C...........................................................................................................................7
Conclusion.......................................................................................................................................8
REFERENCES................................................................................................................................9
Business Decision Making: Investment Appraisal Techniques and Tesco's Performance_2
INTRODUCTION
Effective decision making plays vital role in company's growth, decision making is
done by using investment appraisal tools. This report will discuss various investment
appraisal technique and also Dolapo Plc should select which model. Further will evaluate
Tesco's performance by reviewing ratios and also stating limitations of ratios.
MAIN BODY
Task 1
Question 1 A
Dysn model 1
Computation of NPV
Year Cash inflows PV factor @ 12%
Discounted
cash inflows
1 120000 0.893
107142.85714
2857
2 90000 0.797 71747
3 75000 0.712 53384
4 80000 0.636 50841
Total discounted cash
inflow 283115
Initial investment 150000
NPV (Total discounted
cash inflows - initial
investment) 133115
Business Decision Making: Investment Appraisal Techniques and Tesco's Performance_3
Computation of IRR
Year Cash inflows
0 -250000
1 120000
2 90000
3 75000
4 80000
Internal rate of return (IRR) 19%
Computation of Average rate of return
Year Cash inflows
1 120000
2 90000
3 75000
4 80000
Average profit or cash inflow 91250
Average initial investment 250000
average initial investment [(initial
investment + scrap value) / 2]
ARR 37%
Computation of Payback period
Business Decision Making: Investment Appraisal Techniques and Tesco's Performance_4

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