Usefulness of Capital Investment Appraisal Measures and Evaluation of External Sources of Long-Term Finance

Business report

TABLE OF CONTENT
Introduction......................................................................................................................................1
Main body........................................................................................................................................1
Task..................................................................................................................................................1
A usefulness of capital investment appraisal measures...............................................................1
B. evaluate two alternative external sources of long-term finance..............................................2
C. Different types of electronic hardware and software suppliers...............................................4
D. various views on profit maximisation, revenue maximisation, shareholder value
maximisation with regard to financial goal of company.............................................................5
Conclusion.......................................................................................................................................7
REFERENCES................................................................................................................................8

Introduction
T ltd is the college which provide business courses. They want to implement e learning
product and that will require huge capital investment. This study will discuss usefulness of
capital investment appraisal and will also give recommendation that which projects must be
selected within the two options. Further will evaluate external sources for long term finance and
various types of electronic hardware and software suppliers in support of investment proposal.
This report will also discuss profit maximisation, revenue maximisation and shareholder value
maximisation in relation to the financial objective of a company.
Main body
Task
A usefulness of capital investment appraisal measures
Net present value and payback period are both used for capital investment appraisal and what the
methods have their own advantages and disadvantages (Ahmadi and et.al2020). Net present
value is known to be the best single method to measure the profitability on the other hand
payback period gives detailed information that in how many years company will provide the
initial investment back to the investors. But from this net present value is being calculated on the
behalf of currency wine’s payback method talks about the time requirement which is being taken
by the investment to generate return or to the pay the total initial investment to the investor. As
the capital investment decision is one of the important decisions for the perspective of business
and it is important for the investors well. As the T Ltd ITI college which provides proper
education to the students but now due to the heavy competition this organisation has imposed to
use e-Learning facility and provide online education to their students. Show the management of
this university wants to invest plants capital into electronic hardware and software so that they
can provide better e learning program and education to their students. For that they have to
investment options a 10 and B 15. The main objective of Limited and their board of directors that
they want face to face and online tuition interaction between students and teachers within two
years. So in the net present value at examples on the cash flow of the company whether it is
positive or negative of the project. Payback period States about diet how much is going to cost to
the business every launcher project and how much money project will generate during time
frame. It has been seen that many business uses of the methods of capital budgeting decision. But
one of the drawback of Payback period is that it does not consider inflation and cost of capital.
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On the other hand NPV provides detailed information about wealth creation by applying
discount rate so that investor can know how much amount they will get in the future because
NPV believes that the value of money will not remain same in the future. Net present value and
future value of money to provide better decisions to the company and the investor. But there is
some disadvantage with net present value is that it assume and predict the future cash flows
which can be possible that whatever assumption net present value is taking can get different in
the future. On the other hand if the Payback period of the investment is shorter than it is more
beneficial for the investor. Along with this payback period is more useful in certain conditions
where the technology is changing so fast (Nami and et.al 2020). As this method help the
organisation to reduce the situations of obsolescence. As per the case study the main objective of
board of director is that they want all the students get their online tuition of different courses
which is being offered by T Limited within two years so a 10 third of investment will be better
for the organisation as it is fulfilling the objective of board of directors. Because b15 will take
more time as the payback period of B 15 is 3 years 8 months and it is not fulfilling the objective
of board of directors and it becomes difficult to get all the students active online for their courses
within 2 years. Is the finance director of this organisation is a confidence with the internal rate of
return that it will be good if it exceeds of 18% in what the options and it is happening that in
project a 10 the internal rate of return is 25% on the other hand in project b15 internal rate of
return is 20% again project 8 and is beneficial for the company because if the internal rate of
return is higher on the project it will generate high net cash flow for the organisation and
organisation can produce good profitability in the upcoming years as well. So in this case A10 is
fruitful for T ltd and they must go for this project as it is fulfilling their main objective and help
the company to stay competitive in the market as well. Board of directors can consider other
factors as well change in the technology and the teaching environment apart from this
competitors are also one of the major factor if T limited do not provide all the high and advanced
technology to the students then it’s competitors can grab all the students so Board of director
must consider them as well so that they can come up to the right decision.
B. evaluate two alternative external sources of long-term finance.
External sources of finance:
It refers to when company arranged capital outside the business, it is not like retained
earnings which are earned by the business through carrying various business activities (External
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