Business Report on Investment Appraisal, Funding Decisions, Cost Variances, and Procurement

Business report

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK A...........................................................................................................................................3
a) Calculation of Payback period for all projects........................................................................3
b) Calculation of Net present value for all projects. ..................................................................4
c) Ranking the projects on the basis of payback and net present value......................................4
d) Which project may be selected if projects are mutually exclusive? Explain your
recommendation..........................................................................................................................5
e) Discuss the strengths and weakness of net present value and payback methods in the
context of investment appraisal...................................................................................................5
f) Discuss five qualitative factors which the directors may need to consider before making a
final Decision..............................................................................................................................5
TASK B ..........................................................................................................................................6
a) Three alternative methods of Funding....................................................................................6
b) Discuss how the above financing decisions are linked with each other.................................7
TASK C...........................................................................................................................................7
a) Table presenting Standard and actual data..............................................................................7
b) From the available information suggest possible explanations for the variances identified.. 8
TASK D...........................................................................................................................................9
Distinguish between centralised and decentralised procurement. Discuss the benefits of
centralised purchasing and decentralised purchasing.................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business report alludes to a progression of data about an organization's tasks, creation
and experiences regarding what the organization plans for future. This report contains for the
most part the verifiable information about the organization's working. It helps the various clients
of this report to fundamentally investigate the choices that they are accessible with to make a
choice. It is taking future choices on the genuine chronicled information present in the business
report (Hartzell and Baum, 2021). In this report, the principle center is around the different data
which is bookkeeping and functional of K plc. The report is partitioned into four sections,
section A explores the undertakings which K plc. ought to put resources into. Part B discusses
the financing that the organization can go with. Part C assesses the organization's expense
differences and Part D features the overall outline of unified and decentralized attainment.
TASK A
a) Calculation of Payback period for all projects.
Payback period = Initial investment / Annual Cash flow
Table showing calculation of Payback period of Projects A-F
PROJECT Initial investment / Annual Cash flow Payback Period
A 1,000,000 / 300,000 3.33 Years
B 400,000 / 100,000 4 Years
C 700,000 / 200,000 3.5 years
D 614,500 / 100,000 6.15 years
E 500,000 / 120,000 4.17 years
F 560,000 / 100,000 5.6 years
Project G (Using Cumulative cash flow)
YEAR ANNUAL CASH FLOW CUMULATIVE CASH FLOW
0 -200000 -200000
1 100000 -100000

2 100000 0
3 20000 20000
4 20000 40000
5 20000 60000
6 20000 80000
Payback period for Project G = Initial Investment / annual cash inflows
Payback period = 200000/100000
= 2 years
b) Calculation of Net present value for all projects.
NPV= (Annual Cash Flow * Annuity value) – Initial investment
Project Initial
Investment(A)
Annual cash inflow
(B)
Annuity value
(C)
NPV (C*B)-A
A 1000000 300000 4.36 306590
B 400000 100000 3.17 83010
C 700000 200000 3.79 58160
D 614500 100000 6.14 40
E 500000 120000 4.87 84208
F 560000 100000 6.41 54460
Project G= (Solution using PV factor)
Cash flows of project G PV factor PV cash flow
100000 0.'909 90900
100000 0.'826 82600
20000 0.'751 15020