Investment Appraisal and Risk Analysis for Canon Inc.

This report evaluates the potential investment opportunities for Canon Inc. using investment appraisal techniques and risk analysis. It discusses the impact of Covid-19 on the company's financial performance and suggests investment requirements based on the assessment. The report includes a PESTLE analysis and SWOT analysis of Canon Inc. and provides a sensitivity analysis for the company's return and risk calculations.

Accounting and Finance
for Decision Making

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
Motivation for proposed investment......................................................................................................3
Conduct investment appraisal using both qualitative and quantitative information..............................4
Critically discuss the risk and return and its potential impact on its financial performance....................8
REFERENCES..............................................................................................................................................10

INTRODUCTION
The impact of Covid – 19 on the corporation, which might change the potential losses, is
explored in the study below. The effect of the epidemic on the businesses of Canon Inc. is
mentioned in the subsequent study. Canon Inc. is a Japanese large corporation based in Ota,
Tokyo that manufactures and sells optical, image, and heavy machinery. It was established on
August 10, 1937. Due to the obvious continual creation of goods like as pictures, projectors,
healthcare gear, and scanning, the firm is well-known and rated leader in the international
economy. The report's major goal is to advise the organisation on how lucrative and beneficial
Canon Inc. is from the standpoint of investors. This article details a prospective expenditure that
Canon Inc. may consider for the firm's success and development. The corporation considers the
expenditure by evaluating and estimating different long investments that will benefit the country.
This report employs investment assessment approaches to assess the effect of the risk and
strategy in order to make decisions (O'Reilly and Hall, 2021).
For Fulfillment, the firm’s investment requirements are determined and advised based on
the aforesaid assessment and structure of the Canon plc research. For investment spending, the
corporation uses the NPV method. Suggestions include facts well about organisation, such as the
corporation's goal of expanding its company through purchasing and contacting other well-
known businesses.
MAIN BODY
Motivation for proposed investment
The Canon firm was more harmed during the Covid – 19 epidemics because people were
primarily vulnerable to health problems and nourishment. This circumstance has a global impact
on the firm's earning potential. It is critical to handle this issue for the firm's progress and
expansion in the global market, since if the firm does not make appropriate decisions for the
years that followed, the risk of lost revenue will increase. Since firms face significant danger and
losses during a shutdown, most corporate begin marketing and offering their goods or services
on social networking sites. However, the firm's financial and fiscal standing in the industry
suffers as a result of this massive move.

In any corporation, informal workers play a vital role. It aids in the resolution of Canon's
operational and finance situation in judgment, which includes coordinating and motivating as a
management for risk analysis in the corporate market amongst competitors. Since these results of
the assessments are obtained by gathering both the company's safety and weaknesses, it is a time-
consuming job for the company (Qazi and et.al. 2021).
Capabilities are the organization's strength, assisting in profit and commercial progress
while also providing information of organizational efficiency. Following this increase, the
company becomes more driven and begins investments in new initiatives in order to generate
income.
Deliverables are the sort of thing that has been used in determining the functionality of a
company as well as how much authority they just had to finance projects that returns it, which is
difficult to establish as a shareholder or a businessman since all companies spend within these
business owners that are successful and profitable and beneficial in corporate success and
development on a large scale.
Conduct investment appraisal using both qualitative and quantitative information
The corporation includes knowledge while investment in the Canon organization. The
corporation uses quantitative and qualitative sources to capture knowledge regarding the
company, with quantitative approach including payback time, net present value, and IRR and
qualitative techniques comprising situational analysis for evaluating the Canon corporate
situation (Kong, Zhu and Qin, 2021).
Payback Period
Year
Annual
Cash
Inflow
Annual Cash
Outflow
Annual Net Cash
flows
Cumulative Cash
Inflows
0…… 0…… 180000…… -180000…… 0……
1…… 100000…
… 800000…… -700000…… -700000……
2…… 400000…
… 200000…… 200000…… -500000……

3…… 500000…
… 0…… 500000…… 0……
4…… 800000…
… 0…… 800000…… 800000……
5…… 800000…
… 100000…… 700000…… 1500000……
Payback period = Number of years + Uncovered Amount / Cash Flow in recovery year
= 3 years + 0/50000
= 3 years
Compute of Net Present Value
Years Net Cash
Inflows Discounting @ 8% PV of Cash Inflows
1…… -180000…… 0.926…… -166680……
2…… -700000…… 0.857…… -599900……
3…… 200000…… 0.794…… 158800……
4…… 800000…… 0.735…… 588000……
5…… 900000…… 0.681…… 612900……
Net Present Value 593120……
Calculation of Internal Rate of Return
Discounting Factor @8%
Years Cash inflows
Discounting Factor
@8%
PV value of cash
inflow
1…… -180000…… 0.926…… -166680……
2…… -700000…… 0.857…… -599900……
3…… 200000…… 0.794…… 158800……
4…… 800000…… 0.735…… 588000……
5…… 900000…… 0.681…… 612900……
Total Cash
inflows 593120……

Discounting Factor @15%
Years Cash inflows
Discounting Factor
15%
PV value of cash
inflow
1…… -180000…… 0.87…… -156600……
2…… -700000…… 0.756…… -529200……
3…… 200000…… 0.658…… 131600……
4…… 800000…… 0.572…… 457600……
5…… 900000…… 0.497…… 447300……
Total Cash
inflow 350700……
IRR = Lower rate + Lower Rate NPV/ (Lower Rate NPV – Higher Rate NPV) * Diff. in Rates
= 8% + (593120 / 593120 - 350700) * (15 – 8)
= 8% + (593120 / 242420) * 7
= 8% + (2.45) * 11
= 8% + 26.95 %
= 34.95 %
PESTLE analysis of Canon:
Political Factor: The Canon firm establishes norms, invests lesser, and makes more, allowing
companies to influence government since it creates large amounts of income in most nations,
increasing the country's standard Of living (Gonçalves and Gaio, 2021).
Economic Factor: It is very important in company. Following the Covid-19 incident, the firm has
placed a heavy emphasis on the health industry since the price of Canon goods is so expensive
that people cannot afford them.
Social factor: Canon Company prioritizes the social aspect since it appreciates the demands of its
customers. Canon offers products and solutions to both B2B and B2C demands.

Technological Factor: In technologically speaking, Canon is the most well-known corporation or
business. It generates higher-quality items and is continually on the leading edge of innovation
and technologies (Liu, 2021).
Legal Aspect: The Corporation must adhere to all laws and restrictions established by the state's
constitution. Canon faces several legal issues as a result of the complexities of operating
regulations in different nations.
Environmental factor: Canon undertakes numerous initiatives to protect and preserve the
environment, including lowering carbon emissions and reusing wastewater.
SWOT Analysis
Strength Weakness
Canon offers a wide selection of products to
fulfill the needs of both consumers and firms.
Diversity assists Canon in reducing risk and
increasing revenue. It is well-known for its
R&D and holds several patents for its
technologies. Canon has a good brand image
since it operates all over the world.
Canon specializes in the production of goods
but is best known for its image technologies.
Its other goods are not as nicely constructed.
There seems to be a problem with item
uniformity, which might harm the public
reputation.
Opportunities Threat
Canon may encounter several opportunities in
the nearest term, like the increase of online
publishing, the expansion of the consumer
electronic industry, latest innovations in
consumer habits, and the training of health
services, all of which will offer new
marketplaces for Canon.
Canon confronts the issue of declining camera
demand since the bootstrapped startup has a
significant impact on cell phones. Increases in
raw material prices might jeopardize Canon's
competitiveness. Furthermore, in order to keep
pace with the fast technological advancements,
the organisation must be adaptable.

Critically discuss the risk and return and its potential impact on its financial performance
Sensitivity analysis is critical for a firm's return and risk calculations. This aims to remove
possible risks by modeling investment risk and judgments. Whenever utilized correctly, it may
aid in the identification of dangers and profitable possibilities, as well as create better prediction.
It aids Canon in evaluating how expenditures affect profits and how consumer traffic affects
selling (Chen, Jermias and Nazari, 2021).
The discounting model's cost of borrowing is set at 8%. It is advantageous for the reduced
business. As a result, the corporation anticipates participation in the development with significant
cost savings. Canon will keep investing in new technological projects, causing the cost of capital
to rise. The larger the expenditure helps to get the greater the reward. Cost-benefit analysis
assists in analyzing existing and predicted costs in relation to forthcoming developments.
Canon's project has an NPV of £593120 for the expenditure. It is particularly useful for the
organisation since it provides increased production and lengthy earnings on the basis of future
investment. As well as the approach used here for computing NPV must be used, with an
emphasis on the company's improvement for potential development and profits. By carrying out
a planning process, the firm's existing valuation is being documented while taking into account
future occurrences and income streams. The main objective behind these strategies is to entice as
many users, stockholders, and the broader population as possible to participate in excess, so
increasing the brand image and general success of a company.
To determine a project's sustainability, the shorter payback period is computed for each
successive month's expected revenue to determine the coefficient at which expenditures equalize
inflows. The reduced payback period aids in recouping the time spent on the upfront outlay. It
implies that the smaller the creditor payment time, the greater the likelihood of recovering initial
costs with the manufacturing and financial support. The above-mentioned plan has a payback
duration of three years against such an expenditure of £ 180000. It offers an idea about the state
of the firm or when to spend resources into the planned project that would be profitable and
profitable or otherwise (Jamwal and et.al, 2021).
By rigorously examining Canon's financial results, this can be anticipated that the firm's
profitability would fall in 2022, but its earnings per share will increase, implying that it is

advantageous to fund the business because the chance rate is low and the reward will be large.
Canon's Vision Technology division announced net sales of 712.2B ($6.8B) and an operating
income of 71.8B ($690M) for FY2020, down 11.8 percent and up 49.1 percent each year (YoY).
Although an 11.8 percent drop in net sales, both of these figures are higher than Canon's FY2020
Q3 estimates, which predicted a 14.7 percent drop in comprehensive net revenue and a 5.9
percent increase in business income.
Whereas the COVID-19 epidemic continues to wreak havoc on much of the world, Canon
observes that the current rise in cases — includes different varieties of the unique coronavirus —
does not also seem to have a significant influence on sales. Additionally, Canon agrees with
Sigma CEO Kazuto Yamaki, who stated in a new conversation that the photographic industry
will stabilise in 2021. Canon forecasts the market to drop by about 3% year over year, a marked
increase from the 20% reductions recorded in the previous 4 years or more (zu Ermgassen and
et.al, 2021).

REFERENCES
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