Capital Investment Appraisal Process and Long-term Finance Requirements for S plc

Business Report

Contents
INTRODUCTION...........................................................................................................................................3
TASK (A).......................................................................................................................................................3
1) Why is capital investment appraisal process so important to S plc?...................................................3
2) Prepare a cash flow analysis statement for the above new investment.............................................3
3) What is the payback period for the new investment? If S plc imposes a three-year maximum
payback should the project be accepted?...............................................................................................5
Determine the net present value for the new investment? Should the investment proposal be
accepted? Explain why?..........................................................................................................................6
Describe the logic behind the net present value approach. What is the relationship between net
present value and cost of capital.............................................................................................................7
Calculate the internal rate of return for the investment proposal..........................................................7
Discuss why the net present value method is often regarded to be superior to internal rate of return. 8
TASK (B).......................................................................................................................................................8
Critically contrast bank loan with an equity issue for all its long-term finance requirements.................8
TASK (C).....................................................................................................................................................10
Calculate the breakeven sales revenue, the sales revenue to achieve a target profit of £120,000 and
the margin of safety..............................................................................................................................10
What are the consequences of a price increase or decrease of 10%.....................................................11
Cost volume profit analysis....................................................................................................................12
TASK (D).....................................................................................................................................................12
Distinguish between three categories of suppliers: strategic suppliers, preferred suppliers and
transactional suppliers..........................................................................................................................12
Compare the advantages of single sourcing and multiple sourcing in the context of procurement.....13
Explain what cross-sourcing is using an example and how it benefits the buyer..................................13
CONCLUSION.............................................................................................................................................13
REFERENCES..............................................................................................................................................15

INTRODUCTION
The administration of huge sums of money, particularly by states or major corporations, is
referred to as finance. Since money supplanted barter as a medium of trade, finance has been
inextricably linked to money. Finance is the lifeblood of all economic, societal, and
organizational activity. The public provides funds to the government on the basis of taxation,
deposits to banking institutions, and owner’s equity, loans, and convertible notes to
entrepreneurs. It is then utilized for a range of economic and non-development initiatives by the
government and other stakeholders, before being returned to the people in various ways as
revenue (Chuang, 2021). This report based on the S plc which wants to add new line of computer
lines. For this require to analysis the different investment activities and apply investment
method. Along with prepare cash flow statement in this report and conduct present value of new
investment. At the end of the report consist of longer sources of finance and calculate break even
analysis and margin of safety.
TASK (A)
1) Why is capital investment appraisal process so important to S plc?
All firms' investment decisions are crucial because they define their potential for success as
well as their final cost layout. Investments typically entail large initial financial expenditures,
tying up significant money. As a result, making sound investing selections is critical. Despite
this, they represent a difficult managerial challenge in an extremely quickly evolving corporate
context.
When creating an estate policy and financing, a capital investment evaluation is performed
to ensure good value. It is a comparison of expenses with relation to those sections of the
property in which there is a potential or desire for improvement, instead of a loss or profit for the
firm overall. Thus, capital investment appraisal important for S plc because it help to get right
decision in regard of new investment.