Investment Analysis for ABC Limited

This assignment analyzes two potential investment projects for ABC Limited, a travel and tourism company. Using both primary and secondary data, the report examines ABC's financial performance, customer preferences, and market trends. Financial tools like Net Present Value (NPV) and Internal Rate of Return (IRR) are employed to evaluate the profitability of each project. The analysis concludes with a recommendation for ABC Limited based on the identified financial benefits.

BUSINESS DECISION
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................2
1.1 Plan in order to collect data for research..........................................................................2
1.2 Survey methodology and sampling method.....................................................................2
1.3 Design a questionnaire for research.................................................................................3
TASK 2............................................................................................................................................5
2.1 & 2.2 Data for research and its analysis in order to develop a tour product....................5
2.3 Analysis of measure of dispersion....................................................................................6
2.4 Quartiles, percentiles and correlation coefficient.............................................................7
TASK 3............................................................................................................................................9
3.1 Producing graphs and charts and its interpretation...........................................................9
3.2 Trend line in order to predict future events....................................................................12
3.3 Business presentation.....................................................................................................13
3.4 Formal business report...................................................................................................13
TASK 4..........................................................................................................................................13
4.1 Appropriate information processing tools......................................................................13
4.2 Project plan and determination of critical path for launching a new tour product.........14
4.3 Financial tools in order to assess viability of investment or project..............................16
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INDEX OF TABLES
Table 1: Raw data for research analysis..........................................................................................5
Table 2: Calculation of mean, median and mode............................................................................5
Table 3: Calculation of standard deviation......................................................................................6
Table 4: Calculation of quartile.......................................................................................................7
Table 5: Calculation of percentile....................................................................................................7
Table 6: Calculation of correlation..................................................................................................8
Table 7: Calculation of NPV..........................................................................................................16
Table 8: Calculation of IRR...........................................................................................................17
ILLUSTRATION INDEX
Illustration 1: Pie chart on sales.....................................................................................................10
Illustration 2: Pie chart on profit....................................................................................................10
Illustration 3: Bar chart..................................................................................................................11
Illustration 4: Line chart.................................................................................................................11
Illustration 5: Trend line................................................................................................................12
Illustration 6: Network diagram.....................................................................................................15
Illustration 7: Gantt chart...............................................................................................................15
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INTRODUCTION
In the business world, it is important to make effective and beneficial business decisions
in order to maximise the profits. In this context, there are different types of tools and techniques
used by researcher which are shown in the present report. In the current case, there is a tour
operator i.e. ABC Limited which is going to launch a new tour product at the national as well as
international level. For conduct the present research and analysis, both primary and secondary
data are collected and analysed for launching the product. Further, report emphasises on various
kinds of measures of central tendency and dispersion which help the scholar in doing effective
research and get reliable data. Apart from this, it shows financial data with the help of graphical
representation. Besides this, present research describes about the financial tools as well as project
management techniques such as network diagram.
TASK 1
1.1 Plan in order to collect data for research
To conduct a research, raw data is essential for the investigator which is collected from
different sources. Data is gathered with the help of primary as well as secondary sources in
which various kinds of parameters are available which help to derive better and reliable
information (Wyse, 2012). With the new product, travellers or visitors will be able to visit
various national and international destinations in an easy way. Data which is collected for the
first time by scholar is known as primary information while, data which is already gathered and
published by other investigators is known as secondary.
Furthermore, for gathering primary data, there are numerous sources available for raw
data collection like survey, interview, questionnaire, etc. On the other side, in secondary data, it
considers various sources such as publication, articles, newspapers, journals and annual report of
the firm (Mackey and Gass, 2015). In the present case, questionnaire is to be designed and
distributed among 40 people between local community of London in order to know their
preferences, attitude, behaviour of buying, etc. Further, annual report of ABC Limited is to be
used for collecting secondary data.
1.2 Survey methodology and sampling method
Survey methodology shows the tools and techniques that are used for research on a
particular topic. Here, to analyse the market in order to launch a new tour product, questionnaire
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is to be framed and distributed with the help of internet and online tools such as social media.
The respective methodology provides reliable facts and figures without consuming extra time
(Neuman and Robson, 2012). Further, to derive prices of tour packages and revenue as well as
profit, annual report of ABC Limited is to be used.
Moreover, for the purpose of data analysis, sample data is required for distributing
questionnaire among people. There are different kinds of sampling methods available such as
cluster, stratified, simple random as well as convenience. In the present case, for collecting
sample data of 40 people between local communities of London, simple random sampling
method is used. According to the respective technique, the scholar derive sample data on the
basis of randomly without using any parameter.. It is a widely used method and easy for the
investigator as well.
1.3 Design a questionnaire for research
QUESTIONNAIRE
Demographic information
Name _________________
Gender ________________
Age ___________________
Q 1. Do you use the tour products offered by tour and travel company, ABC Limited?
 Yes
 No
Q 2. How much you spend on travelling in one year?
 Less than £20,000
 £20,000 - £45,000
 £45,000 – £80,000
 £80,000 - £1,00,000
 More than £1,00,000
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Q 3. Which type of destination you like to prefer to travel?
 Historical
 Natural
 Spiritual
 Any other ______________
Q 4. Which factor do you consider while making decision to purchase a tour product?
 Price
 Safety
 Destination
 Facilities
 Any other _____________
Q 5. Do you agree that current tour products offered by ABC Limited meet with your
satisfaction level up to greater extent ?
 Highly agree
 Agree
 Neutral
 Disagree
 Highly disagree
Q 6. Which type of tour packages you often purchase?
 National packages
 International packages
Q 7. Any feedback or suggestions for improvements?
________________________________________
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TASK 2
2.1 & 2.2 Data for research and its analysis in order to develop a tour product
For doing analysis and research in order to launch a new tour product by ABC limited
raw informations are requires which are collected from secondary sources (Geerts, 2011). The
data and its analysis or conclusion is enumerated below:
Table 1: Raw data for research analysis
Amount spent by
visitors (in £,000)
Middle
value (X)
Number of respondents
or travellers
(Frequency)
Cumulative
Frequency (CF)
Frequency*
Middle
value
Less than 20 10 6 6 60
20 and less than 30 25 17 23 425
30 and less than 40 35 38 61 1330
40 and less than 50 45 53 114 2385
50 and less than 60 55 79 193 4345
60 and less than 70 65 94 287 6110
70 and less than 80 75 53 340 3975
80 and less than 100 90 25 365 2250
Summation ∑F = 365
∑FX =
20880
Table 2: Calculation of mean, median and mode
Measure of central tendency Formula Outcome (£,000)
Mean ∑FX/∑F = 20880 / 365
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= £57.21
Median Lower class limit (L) + (∑F/2-
CF of previous Class interval
(CI) )/F * C I
= £48.67
Mode L + (F1-F0)/(2*F1-F0-F2) *
CI
= £62.67
 Mean: The measure of central tendency which helps to the ABC limited tour company in
order to derive average value is known as mean. From the above table it can be analysed
that average amount worth £57.21 spent by 79 number of travellers in order to buy our
packages. Median: As per the median it helps to split informations or data in two equal portion
when whole data is large and unable to split manually (Vujaklija and et.al., 2010). In the
present case the £48.67 spent by the 53 visitors at the middle level. It can be analysed that
above the median value there are number of respondents was low. Further, after amount
worth £48.67 customers of tour products are increases and higher in comparison to above
the middle point.
 Mode: Moreover, mode shows number of customers which are frequently buying
products and services of ABC Limited. In the present case there are £62.67 amount is
spent by the 94 people which shows that total 94 number of visitors are purchasing its
tour products and services often (Baum and Crosby, 2014).
2.3 Analysis of measure of dispersion
In the measure of dispersion there is standard deviation is to be calculated which is
described below:
Table 3: Calculation of standard deviation
Amount spent by
visitors (in £,000) Middle value
Freque
ncy
MV
Mean D/10 D^2 F*D F*G
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Less than 20 10 6 -47.2 -4.72 22.27 -28.32 133.62
20 and < 30 25 17 25 2.5 6.25 42.5 106.25
30 and < 40 35 38 35 3.5 12.25 133 465.5
40 and < 50 45 53 45 4.5 20.25 238.5 1073.25
50 and < 60 55 79 55 5.5 30.25 434.5 2389.75
60 and < 70 65 94 65 6.5 42.25 611 3971.5
70 and < 80 75 53 75 7.5 56.25 397.5 2981.25
80 and < 100 90 25 90 9 81 225 2025
Summation 365 342.8 2053.68 13146.12
Standard deviation £55.13
 Standard deviation: The measure by which the management of ABC Limited able to
know that actual value is up to which extent deviate from the average value of whole data
set. Higher the standard deviation and lower the mean value is better for the company, in
other words difference should be higher between both the variables (What is Standard
Deviation? - Definition, Equation & Sample, 2017). In the present case standard
deviation value is £55.13 which is not far from mean value i.e. £57.21. It can be said that
performance of the ABC Limited is good in the industry but not that much better.
2.4 Quartiles, percentiles and correlation coefficient
Table 4: Calculation of quartile
Type of quartile Formula Figures
Lower quartile (Q1) Q1 = ∑F/4
Q1 = L + (∑F/4 – C)/F * CI =£91.5
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Upper quartile (Q3) Q3 = 3(∑F/4)
Q3 = L + [3(∑F/4)-C/F]* CI =£274.5
Inter-quartile range (Q2) (Q3 - Q1) =£183
Table 5: Calculation of percentile
Type of quartile Value
25.00% £91.5
50.00% £183
75.00% £274.5
Table 6: Calculation of correlation
Particulars Sales (in £,000) Profit (in £,000)
Sales (in £,000) 1 0.98
Profit (in £,000) 0.98 1
 Quartile: A measure of dispersion by which the scholar can split whole data set in
equally four parts is identified as quartile. There are three level of respective tool such as
lower, middle and upper which are denoted as Q1, Q2 and Q3 respectively (Irani, 2010).
From the above table it can be said that amount spent by travellers is consistently
increases in each level of quartile which shows that ABC limited able to attract more
customers. Amount at Q1, Q2 and Q3 is £91.5, £183 and £274.5 respectively by the
potential buyers of tour products. Percentile: As per such measure of dispersion there are three levels like as 25%, 50% as
well as 75% where number of respondents and increasing and spent amount worth £91.5,
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£183 and £274.5 respectively. By this it can be analysed that the company is performing
well.
 Correlation: The tool is used by scholar for understand relationship among two variables
which are interrelated. Standard value of the correlation of coefficient is always lies
between -1 to +1 (Bennouna, Meredith and Marchant, 2010). In the present case relation
among sales and profit of ABC limited is strong and highly effective. Here correlation is
0.98 which indicates that both the variables impact on each other directly that means if
sales reduces then profit as well and vice-versa.
TASK 3
3.1 Producing graphs and charts and its interpretation
Graphical representation is a tool by which analyst and scholar both can easily interpret
the data which are available and calculated. In the present research report there is sales or
revenue and profit or margin data are shown from the accounting period 2011 to 2016 of ABC
Limited. There are different kinds of graphs and charts which can be conducted for proper and
effective analysis (Carr, Kolehmainen and Mitchell, 2010). Among them here pie chart, bar
graph, line chart and histogram are drawn which are given as below with interpretation:
Year
Sales (in
£,000)
Profit (in
£,000)
2011 250 90
2012 310 110
2013 265 95
2014 325 125
2015 390 150
2016 430 190
Pie chart for Sales
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Illustration 1: Pie chart on sales
Pie chart for Profit
Illustration 2: Pie chart on profit
Bar chart
10
2011
2012
2013
2014
2015
2016
2011
2012
2013
2014
2015
2016

2011
2012
2013
2014
2015
2016
0 50 100 150 200 250 300 350 400 450 500
Illustration 3: Bar chart
Line chart
2011 2012 2013 2014 2015 2016
0
50
100
150
200
250
300
350
400
450
500
Illustration 4: Line chart
Interpretation of above graphs
The above drawn all the graphs and charts are shows sales and profit earned by ABC
Limited at the end of financial year 2011 to 2016. From the above charts and graphs it can be
interpreted that revenue of the ABC Limited is increases from the year 2011 to 2012 which
11
Sales
Profit
Sales
Profit

shows that it is able to attract more number of travellers and visitors in order to purchase its tour
packages. Further, due to this profit is also enhances from £90 to £110 in same year (Vercellis,
2011). Further, in the year 2013 sales and profit both are reduces and come up at £265 and £95
respectively. Afterwards, from 2013 sales is consistently raises up to the year 2016 from worth
£265 to £430. Increasing sales lead to raise profit as well within same financial year which is
from £95 to £190. This shows that the ABC Limited has better business and marketing strategies
by which sales and profit enhances. With this management of tour company is able to control
over the expenses by which profit affected in positive manner.
3.2 Trend line in order to predict future events
The line by which management of ABC Limited predict about the future sales and profit
is called as a trend line. For the respective tour firm trend line on basis of revenue and margin is
drawn below:
2011 2012 2013 2014 2015 2016
0
50
100
150
200
250
300
350
400
450
500
f(x) = 34.2857142857x + 208.3333333333
f(x) = 18.5714285714x + 61.6666666667
Illustration 5: Trend line
The above mentioned trend line describes that sales as well as profit both has upward
trend from the financial year 2011 to 2016. There is a difference is that revenue increasing with
the higher growth rate while rate of growth in the profit is lower compare than sales. It can be
forecasted that ABC Limited will be generate revenue in the upcoming accounting periods with
the higher growth rate (Ford and Richardson, 2013). On the other side as per the margin it can be
predicted that management will earn profit in the future but at lower value in comparison to sales
and revenue.
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Sales
Linear (Sales)
Profit
Linear (Profit)

3.3 Business presentation
Enclosed in power point presentation
3.4 Formal business report
Formal business report
To,
Manager,
ABC Limited,
Date: 21st February 2017
Background
The research is to be conducted by ABC Limited in order to launch a new tour product at both
national and international level. For this primary and secondary both the data used and
represented with the helps of different graphical tools and techniques.
Results and findings
It can be found from the above analysis that the respective tour enterprise is performing well in
the travel and tourism industry. Sales of the firm is continuously increases from the financial
year 2013 to 2016 by which profit is enhances in same period as well. It can be identified that
more number of travellers which uses tour products offered by ABC business entity. Further,
the management has effective tactics and offers for attract high number of visitors.
Conclusion and recommendations
It can be concluded that financial performance of ABC Limited is overall good and it has better
strategies and techniques for generate profit and revenue as well. It can be recommended to the
management that it needs to formulate more effective strategies which helps to earn more profit
and become brand within the industry.
TASK 4
4.1 Appropriate information processing tools
Most used and suitable information processing techniques and tools are as follows:
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 Management information system (MIS): The most widely and better information
processing tool is MIS which gives all the data and informations related to management
oriented to the tour company (Nowduri, 2011). With this the ABC Limited is highly able
to manage overall business entity in a proper manner in the tour industry. Transaction processing system (TPS): Another information processing tool is TPS where
the manager easily record all the financial transactions on daily basis. Here the ABC
Limited can derive cost of production by recording all the disposals which are incurred
while making tour packages.
 Decision support system (DSS): According to the respective toll DSS the manager of tour
organisation able to take highly effective business decision even in the complex situations
as well (Dufresne and et.al., 2014). The decision support system is helps to firm in order
to generate more sales and revenue by taking appropriate decisions for company.
4.2 Project plan and determination of critical path for launching a new tour product
In the present research there is a ABC limited company which is going to launch a new
package or product in the tourism sector. For this it needs to go through some activities which
are shown below with help of project management tool such as Gantt chart and network diagram:
Series no. Description Activity Preceding activity Duration (in days)
1
Conduct research of tour
industry A - 7
2 Analysis of rivalry firms B A 4
3
Determine marketing
strategy C A 12
4 Create a marketing plan D B 16
5 Develop customer relations E D 9
6
Identiofy possible
opportunities F C, E 6
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7 Create a timeline G F 3
8 Launch new tour product H G 2
Network Diagram
Illustration 6: Network diagram
Gantt Chart
Illustration 7: Gantt chart
Above mentioned both the diagram and chart are very helpful for the project manager of
ABC limited. With such tools and techniques the firm is able to determine critical path where it
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able to reduce overall project duration by starting two or more activities simultaneously (Moradi,
2012). In the present case critical path for launching new tour products is as follows:
1+2+4+5+6+7+8
Furthermore, for complete the project total time taken is given as below:
7+4+16+9+6+3+2 = 47 Days.
Hence, it can be said from the above mentioned network diagram that the overall project
launching a new tour product will be complete within 47 days only. With this the project
manager of ABC limited can start second and third activity simultaneously which lead to reduce
total 12 days in order to complete the project in effective manner.
4.3 Financial tools in order to assess viability of investment or project
In order to know that which one project will be more beneficial in the future after making
investment then various financial techniques or tools used by the entrepreneur. Different
investment appraisal methods are such as NPV, payback period, IRR, ARR etc (Hsu, Kakade and
Zhang, 2012). Among them some important are shown below:
Table 7: Calculation of NPV
Year
Cash flow of
Investment A
(Amount in £)
PV
factor
@ 12%
Present value
of
Investment A
Cash flow of
Investment B
(Amount in
£)
PV
factor
@ 12%
Present value
of Investment
B
Initial
investment -£300000 -£300000
1 50000 0.893 44643 60000 0.893 53571
2 75000 0.797 59790 45000 0.797 35874
3 100000 0.712 71178 95000 0.712 67619
4 170000 0.636 108038 125000 0.636 79440
5 215000 0.567 121997 185000 0.567 104974
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Total 405645 341478
Less: Initial
investment 300000 300000
NPV £105645 £41478
It can be interpreted that investment one providing higher return in comparison to another
available project. Net present value of investment one and two is £105645 and £41478
respectively which indicates that project one is beneficial at the end of fifth year. Hence, it can
be suggested to ABC Limited that it needs to make investment in the project one due to
providing higher future value.
Table 8: Calculation of IRR
Year
Cash flow of Investment A
(Amount in £)
Cash flow of Investment B
(Amount in £)
Initial investment -£300000 -£300000
1 50000 60000
2 75000 45000
3 100000 95000
4 170000 125000
5 215000 185000
Internal rate of return 22.33% 16.36%
From the above table of IRR it can be depicted that, first project has higher rate of return
at the end of five years compare than project two (Aremu, 2012). As per the internal rate of
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return ABC Limited requires to adopt the project one which gives internal rate of return 22.33%.
Further, respective IRR is higher than another available investment because second has IRR only
16.36%.
On the basis of both the tools such as NPV and IRR the management of ABC Limited
should undertake investment one and put money in it for earning higher profit in the future.
CONCLUSION
It can be summarized from above carried out analysis that for doing research in order to
launch a new tour package by ABC Limited both primary and secondary data are collected and
analysed. On the basis of measure of central tendency such as mean, median, mode, standard
deviation and correlation company is performing well in the travel and tourism segment. Further,
on the basis of financial data such as revenue and profit business performance of ABC Limited is
well in its sector. It can be concluded by financial tools that as per the net present value and
internal rate of return investment one has higher benefits compare than another projects. So, it
can be recommended to the management that it should adopt project one for making an
investment.
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