Calculation of Investment Appraisal Techniques and Valuation of Dragon PLC | Desklib

INDIVIDUAL
PROJECT

Table of Contents
Question 2........................................................................................................................................3
A) Calculation of different investment appraisal techniques and providing recommendations
for the economic feasibility to acquire the machine:...................................................................3
B) .................................................................................................................................................5
C) Evaluation of the benefits and limitation of each of the used investment appraisal
techniques-...................................................................................................................................6
Question-3 Valuation of Dragon PLC.............................................................................................9
A) Price/ Earning Ratio-..............................................................................................................9
B) Discounted Cash Flow Method-.............................................................................................9
C) Dividend Valuation Method-................................................................................................10
D) Critical discussion of the valuation techniques and recommendation with economic
justification-...............................................................................................................................10
REFERENCES..............................................................................................................................13

Question 2
A) Calculation of different investment appraisal techniques and providing recommendations for
the economic feasibility to acquire the machine:
1) Payback period-
Payback Period method
Years cash inflows cumulative cash inflows
1 200.5 200.5
2 200.5 401
3 200.5 601.5
4 200.5 802
5 200.5 1002.5
6 200.5 1203
7 200.5 1403.5
Initial investment 588.5
Payback period 2
0.935162095
Payback period 2 years and 11 months.
2) Accounting Rate of Return-
Years cash inflows
1 200.5
2 200.5
3 200.5
4 200.5
5 200.5
6 200.5
7 200.5
1403.5
Average profit or cash 200.5

inflows
Initial investment 588.5
Scrape value 76.505
Average initial investment 332.5025
ARR 60.30
so the ARR is 60.30%.
3) Net Present Value-
Years cash inflows PV factor @ 8%
Discounted cash
inflows
1 200.5 0.925925926 185.6481481
2 200.5 0.85733882 171.8964335
3 200.5 0.793832241 159.1633643
4 200.5 0.735029853 147.3734855
5 200.5 0.680583197 136.456931
6 200.5 0.630169627 126.3490102
7 277.005 0.583490395 161.6297569
Net present value of inflows 1088.51713
Initial cash outflows 588.5
NPV( total discounted cash
inflows 500.0171296
4) Internal Rate of Return-
Years Cash flows
0 -588.5
1 200.5 0.775193798 155.4263566