Investment Appraisal Techniques for Zylla Limited

TASK 4

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Various short and long term sources of finance..........................................................................1
Evaluation of investment appraisal techniques with recommendations......................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
Investment appraisal is the concept of ascertaining the viability and relevancy of an
investment in an organisation. There are various specific techniques by which profitability of the
investments can be determined (Harris, 2017). A specific case of Zylla Limited is given for this
report. This company is operating in the business of ferries in which they provide river crossing
services to vehicles, goods and individuals. The main aim of this report is to present an evidence
based investigation to the BOD of this company in order to seek approval for the investment in
new ferry. This report includes various long and short term finance options along with appraisal
of the new ferry investment using techniques of Net present value, IRR and payback period.
MAIN BODY
Various short and long term sources of finance
Zylla limited is engaged in the business of ferries which is currently at growing stage, due
to which this company is seeking investment for a new ferry. Zylla will require funds for
investment in the ferry (long term) and funds for working capital for ferry operations (short
term). There are various sources of finance which this organisation can use to fund its investment
as well as for working capital requirements and that are discussed below:
Sources for short term finance
 Trade credit – This source allows organisation to procure credit from their trade partners
such as suppliers against the guarantee of their business relations. By this mode, Zylla
can fulfil its working capital requirements by procuring credit from their trade partners.
 Overdraft bank facility – This facility is the short term finance which allow individuals
and organisations to withdraw additional money apart from their existing balance from
their bank account. This source will help Zylla limited to gain funds from their bank
accounts for which they have to pay minimal amount of fees.
 Commercial paper – This type of short term finance has maximum maturity period of 270
days which allows organisations to issue a promissory note to individuals by which they
can gain funds (Balaban, Župljanin and Ivanović, 2016). Using this source, Zylla limited
can procure funds from general public for which they only have to pay a minimum
interest which is also optional.
Sources for long term finance
1