Evaluation of Investment Appraisal Techniques for Funding Acquisition of Ferry

INTRODUCTION TO
BUSINESS STUDIES(Task 4)

TABLE OF CONTENTS
TASK 4............................................................................................................................................1
INTRODUCTION...........................................................................................................................1
Evaluation of different investment appraisal techniques............................................................6
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

TASK 4
INTRODUCTION
Zylla Limited operates in number of ferries which give services of river crossing to
people, vehicles and goods across river. The present report will discuss about short and long term
sources of finance for funding acquisition of ferry along with requirement of working capital.
Furthermore, there will be evaluation of investment appraisal techniques such as NPV, IRR,
ARR and payback period. In this aspect, there will be recommendation about viability of
operation and acquisition of new ferry on basis of these techniques.
Long and short term sources of finance for funding acquisition of ferry and need of working
capital
There are two types of sources of finance for acquiring funds for ferry of Zylla company
and working capital such as short and long term sources.
Short term financing
 Accounts receivable financing: Various banking and non banking financial institutions
gives facilities of invoice discounting. The organization will undertake commercial bills
to banks which is payment minus small fee (Sources of Short-Term and Long-Term
Financing for Working Capital, 2018). In this aspect, bank gathers money through
customer on due date.
 Overdraft agreement: By undertaking overdraft agreement with ban, it would allow
business unit for borrowing with certain limit with absence of any discussion. In this
context, bank might have condition of collateral which will charge daily interest on
outstanding debt with variable rate.
 Customer advances: There are various business which asks consumer to make advance
payment prior to selling good and to give services (Liu, 2019). Especially, it is true for
dealing with big orders and this will take long time for fulfil this. It ensures about some
funds for channelizing its operations to attain those particular orders.
Long term financing
 Long term loan: The full fledged long term loan which will allow bank to accomplish
need of working capital for two or more years.
1