Cost-Volume-Profit Analysis and Capital Investment Decision

ACCY801
Accounting and Financial Management
Trimester 2, 2021
Business Report
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Contents
Executive Summary...............................................................................................................................3
Part A: Cost-Volume-Profit Analysis......................................................................................................4
1) Basic calculations.......................................................................................................................4
2) Profit-vs-volume calculations.....................................................................................................4
3) Figure 1: Profit-volume chart.....................................................................................................4
4) Recommendations.....................................................................................................................5
Part B: Analysis of a Capital Investment Decision..................................................................................6
1) Projected yearly profit and operating cash flows ($).................................................................6
2) Projected net cash flows ($)......................................................................................................6
3) Accounting rate of return (ARR)................................................................................................6
4) Payback period..........................................................................................................................7
5) Discussion of ARR and payback period......................................................................................7
6) Net present value (NPV)............................................................................................................8
7) Internal rate of return (IRR).......................................................................................................8
8) Working capital requirements ($)..............................................................................................8
9) Discussion of the effects of working capital...............................................................................9
10) Conclusion and recommendations........................................................................................9
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Executive Summary
Accounting is being defined as art of recording financial transaction for calculating the
profit earned or the loss suffered. this is necessary in order to ensure that whether the
company is working in proper and effective manner or not. the current study outlined the
calculation of the profit and volume and its chart. along with this the study also evaluated
the working relating to cpaital budgeting techniques in order to ensure that the most
beneficial investment option is selected.
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