Fundamentals of Accounting and Finance: Investment Appraisal Techniques

This presentation on Fundamentals of Accounting and Finance covers different investment appraisal techniques like Payback, NPV, IRR and ARR. It explains how to analyze whether a project should be accepted or rejected based on these techniques. The presentation concludes with a recommendation to not invest in the project analyzed in the presentation.

Fundamentals of accounting and finance
instead of advanced corporate reporting.

Table Of Content
Introduction
Payback period
Net Present value
Accounting rate of return
Internal rate of return
Recommendation
Conclusion
References

Introduction
 Accounting basics entail documenting, categorising,
summarising, evaluating, and analyzing key findings in
accordance with accounting rules. All money transfers and
occurrences are documented in the accounting system. The
evaluated results are then presented to the increasingly
diverse range consumers in the financial statement.
 In this presentation consist of different appraisal techniques
like Payback, NPV, IRR and ARR that helps to analysis
project should be accepted or rejected.

Net Revenues

Pay Back Period

Net Present Value
 This strategic investment assessment approach calculates the capital
injection, whether surplus or deficit, once normal financial commitments
are satisfied. All capital investment assessments have the same goal in
mind: to achieve a positive value. The NPV is a simple equation that
involves net cash flow at a certain current time 't' and a dividend yield,
i.e..
 As a result, the leverage ratio and NPV have an inverse linear relationship.
The net present of assets would be reduced if the discount rate was too
high. A interest rate raises discounted rates across the board, and so most
public investment evaluations are concerned about such a rise.

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Accounting Rate of Return
 This capital investment evaluation method analyzes the
revenue that a venture may make to the level of capital capital
investment needed for the project.
 Companies having a greater rate of return are naturally
chosen over those with a lower return on capital. ARR is a
non-discounted material stock valuation approach since it
does not affects the amount of currency.

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Internal Rate of Return
 IRR is defined in capital investment assessment methodologies as
a discount factor that provides a value of zero to NPV or net
value. Across all public investment assessment methodologies,
IRR is widely regarded as a measure of private capital
effectiveness. As a result, if the cost of equity investments in the
company exceeds the IRR value, the project is extremely likely to
be ignored.
 IRR calculated by using hit & trial method where discounted rate
is for machinery are 9% & 20%.

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Recommendations
 As per the analysis all the project it has been suggested that this
project should not accepted because from the different capital
investment appraisal techniques get negative results. From the pay-
back period, it is analysing that project investment amount do not
recover in five years which is not good from investment purpose.
 From the calculation of NPV it is analysing that negative NPV is
not better for the project so it is suggested that do not selected this
project.
 As per the analysis by ARR method it understands that return rate is
low it means company do not get good return from this project.
 Thus, from the overall analysis it s saying that investment in this
project is not goods it is required to select any other option for the
investment.

Conclusion
 As per the above analysis it is concluded that this project is
not good for the business so it is recommended that do not
invest into this project.

References
Oueslati, A. and Hammami, Y.,
2018. Forecasting stock returns in
Saudi Arabia and
Malaysia. Review of Accounting
and Finance.
Fang, D. and Olteanu-Veerman,
D., 2020. The case for factor
investing in China A shares. The
Journal of Index Investing, 11(2).
pp.76-91.