Capital Investment Appraisal Techniques for RT Plc

Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Critically discuss the usefulness of the respective capital investment appraisal measures in the
table above and make a recommendation as to which option should be chosen.........................3
Explain why the finance director was so confident that IRR would be well in excess of 7 % for
both options..................................................................................................................................4
CONCLUSION ...............................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Accounting is one of the most crucial aspects for each and every firm as it helps in
analysing, evaluating, and summarising all of the factors that are very critical for a firm and thus
help in enabling the company to get an upper hand in the market by taking appropriate decisions
which can help it in the long run scenario (Aouni, McGillis and Abdulkarim, 2017). The report
includes various capital appraising techniques evaluation with respect to the company that is RT
plc and also it includes comparison of various methods so that appropriate one can be chosen.
MAIN BODY
Critically discuss the usefulness of the respective capital investment appraisal measures in the
table above and make a recommendation as to which option should be chosen
There are a number of benefits of the capital appraisal methods as it helps the enterprise
to summarise its performance in general so that necessary measures can be taken which can help
it to sustain and survive in the market which is highly competitive as well as dynamic in nature.
Capital investment appraisal methods aids in forecasting the aspects of the long term that can be
generated on the grounds of the present value, initial investment, rate of return and so on and
thus it could prove crucial as well as essential for a firm to see all of such factors so that it will
assist the respective company to be profitable as well as lucrative in the sector in which it is
operational irrespective of the industry wherein it is working. There are various other advantages
also which are explained in detail below-
 Accounting rate of return- It is the rate which assists in determining the accounting
profitability in terms of percentage so that impactful decisions can be taken with respect
to it so that it can add value (GOVDYA and KHROMOVA, 2018). As it can be seen that
the project that is A20 has a rate of 13% whereas B25 has a rate of 15% and thus it can be
said by it that if seen in this scenario it is profitable for RT plc to opt for B25 as it is more
profitable.
 Payback period- It is described as the period that is required for a project to recover its
initial investment and thus it is preferable at a shorter side. As A20 has a payback period
of 3.67 years while B25 has a payback period of 4.17 years and thus by comparing it can
be seen that the project which is A20 is much more profitable for RT plc and thus the