Financial Management: Investment Appraisal Techniques and Valuation Methods

FINANCIAL
MANAGEMENT

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Question 2........................................................................................................................................3
Recommending economic feasibility...........................................................................................3
Evaluating effects of the proposal on the company.....................................................................6
Pros and cons of the differing investment appraisal techniques..................................................7
Question 3........................................................................................................................................9
Valuation with the help of price earning ratio.............................................................................9
Discounted cash flow method calculation for dragon plc..........................................................10
Value assessment through dividend valuation method..............................................................11
Associated problem with the different types of valuation techniques.......................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Financial management means planning, organising and controlling the finances of the
company. It have major role in fiscal policy and on the financial assets of the company it apply
management principles. It deals with the investment for the business so that effective decision
making can be done. Finance related work is completed by accounting department of the
organisation. This report will calculate investment appraisal techniques along with its advantages
and limitations. Further it will also calculate valuation methods like price earning ratio, dividend
valuation and discounted cash flow method. Its will also discuss problems with the valuation
method.
MAIN BODY
Question 2
Recommending economic feasibility
This organization known as Super Tasty Soup (STS) Limited which is a fast food
company can be recommended with the following investment appraisal techniques in order to
improve its economic feasibility,
Payback period :
As the result of the calculation of the pay back period the result of which has been
amounted to a total of 3.08 years. It can be said as the total amount of time which the

organization takes for the generation of the revenue (Dawson and et.al.,2018). It is also equal to
the initial investment of this organization. In order to improve this period this fast food
organization needs to increase the total revenue it generates from the sales of its fast food
products. Organization can try out some special offers which will entice the buyers. Introduction
of new and innovative dishes is also one way of increasing the total revenue.
Accounting Rate of Return :
Accounting rate of return also abbreviated as(ARR) as the division of the asset's average
revenue along with its initial investment (Abdel-Kader, Dugdale and Taylor, 2018). In the given
scenario to calculation of the ARR for STS has amounted to a total of 39.22%. This shows that
the return which the organization generates that has been made by no considering the time value
factor. As a result of such a calculation it can be concluded that, it is good for the organization.
Although in order to maintain sustainability and performance in the organization it needs to
focus on improving the marketing strategies for improving its sales.