Financial Ratio Analysis for Tesco

Business Decision Making

Task 1
Ques 1a.
Payback Period
Payback Period Dysn
Year Cash inflow
Cumulative
cash inflow
0 (250,000) (250,000)
1 120,000 (130,000)
2 90,000 (40,000)
3 75,000 35,000
4 80,000 115,000
4 10,000 125,000
Payback period = 2 + (90000/130000)
Payback = 2.69 Years
Payback period Texla
Year Cash inflow
Cumulative
cash inflow
0 (400,000) (400,000)
1 95,000 (305,000)
2 125,000 (180,000)
3 115,000 (65,000)
4 125,000 60,000
4 90,000 150,000
Payback = 3 +
(115,000/180,000)

Payback = 3.64 years
ARR
Period Dysn: Model 1 Texla: Model 2
Year0 (250,000) (400,000)
1 120,000 95,000
2 90,000 125,000
3 75,000 115,000
4 80,000 125,000
Average return 91,250 115,000
Average investment =
(250,000 +
91,250)/2 (400,000+115,000)/2
170,625 257,500
ARR = 53.48% 44.66%
NPV
Perio
d Dysn: Model 1 Discount @12% DCF
Year0 (250,000) (250,000.00)
1 120,000 0.893 107,142.86
2 90,000 0.797 71,747.45
3 75,000 0.712 53,383.52
4 80,000 0.636 50,841.45
4 10,000 0.636 6,355.18
NPV 39,470

Perio
d Texla: Model 2 Discount @12% DCF
Year0 (400,000) (400,000.00)
1 95,000 0.893 84,821.43
2 125,000 0.797 99,649.23
3 115,000 0.712 81,854.73
4 125,000 0.636 79,439.76
4 90,000 0.636 57,196.63
NPV 2,962
IRR
Period Dysn: Model 1
Discount
@12% DCF
Discount
@20% DCF
Year0 (250,000) (250,000.00) (250,000.00)
1 120,000 0.893 107,142.86 0.833 100,000.00
2 90,000 0.797 71,747.45 0.694 62,500.00
3 75,000 0.712 53,383.52 0.579 43,402.78
4 80,000 0.636 50,841.45 0.482 38,580.25
4 10,000 0.636 6,355.18 0.402 4,018.78
NPV 39,470 (1,498.20)
IRR = 12% + {(39,470/(39,470 + 1,498.20)}*(20%-12%)
IRR = 19.70%
Perio Texla: Model Discount DCF Discount DCF