logo

Transport Investment Appraisal Methods

   

Added on  2020-04-07

19 Pages3817 Words140 Views
 | 
 | 
 | 
1FINANCE FOR BUSINESS – MASTERSFinance for business – MastersName of the Student:Name of the University:Authors Note:
Transport Investment Appraisal Methods_1

2FINANCE FOR BUSINESS – MASTERSTable of Contents1. Detecting the relevant accounts that need to be omitted from the list of Exhibit 3:..............32. Mentioning the calculation for the incremental cash flow table for most likely situation:....33. Calculating the NPV, internal rate of return (IRR) and profitability index (PI) for theoverall project:...........................................................................................................................54. Portraying the sensitivity analysis for best case and worst case scenario mentioned inexhibit 1:.....................................................................................................................................65. Calculating the expected sales, standard deviation and coefficient variance from differentsituations:.................................................................................................................................106. Increasing the annual sales by minimal value:.....................................................................107. Mentioning the reason behind using high discount rate when the inflation rate is at 3%:. .178. Mentioning the recommendation for the production of 10-in and 12-in Pipe to theorganisation:.............................................................................................................................18Reference and Bibliography:....................................................................................................19
Transport Investment Appraisal Methods_2

3FINANCE FOR BUSINESS – MASTERS1. Detecting the relevant accounts that need to be omitted from the list of Exhibit 3:The evaluation of the overall case study and exhibit 3 mainly helps in identifying therelevant accounts, which could be excluded from the list, as they serve no purpose. Thisexclusion of the expenses account could actually help in identifying the actual value of theproject.Furthermore, indirect expense and space account is mainly excluded from the exhibit3, which could help in identifying the actual benefits that could be provided from the project.The relevant indirect expenses mainly accounts for supervisor salary, which needs to beprovided for the project. However, evaluation of the overall case study mainly helps inidentifying that no separate supervisor salary needs to be conducted for only this project, asthe existing supervisor will monitor during project. This will not increase the burden on thecurrent supervisor, as depicted in the case study, which will help in reducing the overall costof the project. Nevertheless, the relevant expenses of space need not be conducted by thecompany for this particular project, as it is depicted in the case study that the empty space inthe current premises will be used for the project.Therefore, no rent or any kind of expensesneeds to be included for the current project. Hence, both indirect expenses and spaceexpenses can be excluded from exhibit 3 for deriving the actual value of the project.In thiscontext, Aggarwal & Thakur (2013) stated that evaluation of the overall project mainly helpsin identifying the relevant expenses that needs to be conducted for smoothly operating andidentifying the adequate net profit generated from operations.2. Mentioning the calculation for the incremental cash flow table for most likelysituation:Particulars012345678Initialinvestment$1,000,000 Unit sellingprice0.56 0.58 0.59 0.61 0.63 0.65 0.67 0.69 Annualsales 1,650,000 1,699,500 1,750,485 1,803,000 1,857,090 1,912,802 1,970,186 2,029,292 Revenue924,00980,27 1,039,97 1,103,30 1,170,49 1,241,77 1,317,40 1,397,63
Transport Investment Appraisal Methods_3

4FINANCE FOR BUSINESS – MASTERS0 2 0 4 6 9 3 3 Rawmaterials$544,500 $560,835 $577,660 $594,990 $612,840 $631,225 $650,161 $669,666 Distributioncost$33,000 33,990 35,010 36,060 37,142 38,256 39,404 40,586 Directlabour$40,000 41,200 42,436 43,709 45,020 46,371 47,762 49,195 On costs$11,520 11,866 12,222 12,588 12,966 13,355 13,755 14,168 Utilities$8,000 8,240 8,487 8,7429,0049,2749,5529,839 Repairs andMaintenance$7,000 7,210 7,426 7,6497,8798,1158,3588,609 Generalfactory$18,000 18,540 19,096 19,669 20,259 20,867 21,493 22,138 Depreciation$143,000 235,000 162,000 115,000 89,000 89,000 89,000 46,000 Lostinterest$120,000 123,600 127,308 131,127 135,061 139,113 143,286 147,585 TOTAL $925,020 $1,040,481 $991,645 $969,534 $969,170 $995,576 $1,022,773$1,007,786 salvagevalue$150,000 PBT(1,020)(60,209)48,325 133,770 201,325 246,203 294,630 539,847 Tax- - 14,498 40,131 60,398 73,861 88,389 161,954
Transport Investment Appraisal Methods_4

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Investment Appraisal Techniques and Applications
|15
|2535
|49

Transport Appraisal: Economic Evaluation
|16
|3033
|49

Business Finance and Economic Appraisal
|15
|2602
|33

Corporate Finance Assignment Report
|17
|2427
|43

Significance of Intangible Assets Valuation in Financial Accounting
|10
|3040
|46

Corporate Finance Assignment | Financial Analysis Assignment
|17
|2057
|23