Project on Theory and Application of Financial Management
Added on 2020-06-03
11 Pages2595 Words118 Views
Finance
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FINANCIALMANAGEMENT- (Theory andapplication)(PROJECT 1)
Table of ContentsINTRODUCTION...........................................................................................................................1PART 1............................................................................................................................................11): Critical evaluation of selected investment appraisal techniques.......................................12): Evaluate various impacts of an expansion on the company as well as stakeholders........2PART 2............................................................................................................................................3True and false:........................................................................................................................3MULTIPLE CHOICE............................................................................................................4CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
INTRODUCTIONThis particular report is summarise with multiple choice option of various investmentportfolios. Under this, two individual parts has been divided that provide calculation by usinginvestment appraisal techniques which is helpful in future growth and stability (Ross andWilliams, 2012). Whereas, the next part provide crucial information about various aspects thoseare related to the investment planning.PART 11): Critical evaluation of selected investment appraisal techniquesParticular Year 1Year 2Year 3Year 4Mat. and consumables1.21.10.80.7Dep. And equipments2.32.32.32.3Head office expenses0.40.40.40.4Survey cost0.4000Interest charges1.51.51.51.5W.C0.40.90.90.9Total cost10.710.49.89.2Net profit-0.2-0.4-0.3-0.8Tax @ 30%-0.06-0.12-0.09-0.24NPAT-0.26-0.52-0.39-1.04Cash flows2.041.781.911.26P.v @50%0.6670.4440.2960.197PV 1.360.7910.5660.249Total PV2.9659253Outflow3.6NPV-0.6340741Capital budgeting is one of the major component of an marketing decision-making. Everyinvestment decisions would be measure by analysing proper time to mature. It has to be relies onthe returns which will be collected out of the total investments. In case the investments isunprofitable in long run, then it is critical to make such kind of investment in present time. It isvital to determine current value of future investments as well as its total maturity time. It wouldbe more gainful by putting the capital in an alternative project plan. There are so many methodswhich are used by the managers to analyse various decision-making. Some of them arementioned underneath: 1
NPV(Net present value): It is known as capital investment appraisal techniques which isused to measure total cash inflows of the company. Henceforth, there is an inverse proportionalrelation among discount rate and NPV. A large discount rate can overcome NPV of capital. Withthe high rate of interest would increase discount rates over the period of time. ARR( Accounting rate of return): This capital investments techniques is used tocompare gains that can be earned from a specific project to an amount of initial capitalinvestments. Projects those are mainly earn high rate of return is natural desirable over ones withthe minimum rate of return. It does not consider time value of money. IRR(Internal rate of return): It define this appraisal techniques that provide a zerovalue to net present value. Out of all capital investment tools, IRR is mainly related with themeasuring efficiency of the total capital investments.In this context, crucial investment appraisal methods are suitable in order to analyseoutcomes of two projects. The best suitable appraisal techniques is Net present value(NPV). Asthe NPV calculated in comes as in negative which means that project should be taken intoconsideration.2): Evaluate various impacts of an expansion on the company as well as stakeholdersThere are various financial theory which is helpful in order to make investment planning.The level of investments is an operational aspects to increase efficiency of capital. Some of themare:Modern portfolio theory: This financial theory provide rational investors which will beuse as diversification of markets in order to optimise their portfolios (Oseifuah, 2013).Income theory: It has been said that economy is always at maximum level ofemployment equilibrium. This theory are made maximum focus on savings andinvestment which remain always equal. The economists believe that equality among thesetwo aspects brought by interest rates. Any causes changes in price or total value of moneycan be affecting the income level of an individual. If both these remain equal then theprice would also become more stable. Henceforth, the price level is an effectiveconsequences of modification in total income rather than total quantity of capitalinvestments.Portfolios theory: It is known as modern theory which determine how risk aversion to aninvestors can build portfolios to increase or gain expected return which is based on a2
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