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ATMC BUS106 : Accounting for Business Assignment

   

Added on  2019-10-31

13 Pages3598 Words171 Views
Running head: INVESTMENT DECISION MAKINGInvestment Decision MakingNameInstitution

INVESTMENT DECISION MAKING 2Executive SummaryThe purpose of this study is to assist Mark and Paul in making an investment decision choice between starting a new restaurant and investing the Gold Coast project. In financial investment, the two projects are known as mutually inclusive projects: One has to be foregone if the other one is chosen. There are several techniques used in making investment decisions. For example, net present value, Payback period, accounting rate of return, Profitability Index are used to making an investment decision. The nature of investment involves returns and risks. The higher the expectation from an investment, the higher the associated risks. In the other hand, the scope of investment management is based on several factors. Investor’s objectives, preferences, skills, and constraints. Financial evaluation has been conducted on the two projects to evaluate their viability. The analysis has revealed that the two projects are not comparable. However, the new restaurant project should be chosen because it’s easier to manage and the owners have a direct control over it.

INVESTMENT DECISION MAKING 3Table of Contents1.0Introduction...............................................................................................................................41.1Purpose..................................................................................................................................41.2Scope.....................................................................................................................................41.3Limitations.............................................................................................................................42.0 Nature and Scope of Investments....................................................................................................43.0Investment Opportunity One Budget.........................................................................................63.1Material Budget table.............................................................................................................63.2Labour Budget table..............................................................................................................63.3Cash Budget table..................................................................................................................63.3.1. The total cash budget table..................................................................................................73.4Overview and Analysis of Budgets........................................................................................73.4.1. Material Cost Analysis.........................................................................................................73.4.2. Labour Cost Analysis...........................................................................................................83.4.3. Cash budget Analysis...........................................................................................................83.5Practical issues Associated with the Investment....................................................................84.0Investment Opportunity Two Ratio Analysis.............................................................................9a)Net Present Value (NPV)...........................................................................................................9b)Accounting rate of return (ARR)...............................................................................................9c)Payback Period (PBP)..............................................................................................................105.0Comparison of Investment Opportunities................................................................................106.0References...............................................................................................................................12Appendix 1 Workings..........................................................................................................................13

INVESTMENT DECISION MAKING 41.0Introduction1.1Purpose The purpose of this study is to assist Mark and Paul in making an investment decision choice between starting a new restaurant and investing the Gold Coast project. 1.2ScopeMark and Paul cannot invest in both the investment opportunities. They have to choose one over the other. In financial investment, the two projects are known as mutually inclusive projects: One has to be foregone if the other one is chosen. There are several techniques used in making investment decisions. For example, net present value, Payback period, accounting rate of return, Profitability Index are used to making an investmentdecision. Other factors to be considered include the risks and expected return, availability of cash outflow, and availability of skills, expertise to manage the investment. Some of these factors will be applied in choosing one of the two investment opportunities. 1.3LimitationsThe study is limited to making decisions based on the financial aspect of an investment: the investment with higher returns is chosen. The expected business risks that may hinder performance have not been addressed. 2.0 Nature and Scope of InvestmentsAccording to Finance, investment is defined as purchasing a financial product or services with expected favorable future returns. Likewise, investment practices refer to buying of a valued item, financial product, or placing your money in a project with anticipation of receiving positive future returns. Generally, investment refers to applying money to make more money after a given period. Likewise, investing can be described in three ways. First, buying assets with the aim of increasing the future income. Second, increase wealth accumulation. And third, employing appropriate strategies to fulfill the long-term goals (Gibson, 2008). Investment management is aimed at assisting a potential investor in making the right investment decisions. After analyzing the entire investment process, starting with the requiredfunds and resources and ending with the expected gains, then an investment decision can be

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