Financial Analysis Report: Investment Appraisal and Statistics

This report provides a comprehensive analysis of financial data, encompassing statistical calculations and investment appraisal techniques. It begins with the computation of a frequency table, followed by the calculation of mean, median, mode, range, variance, and standard deviation from a given dataset. The report then delves into investment appraisal, calculating the payback period for a sample investment. Furthermore, it discusses both non-discounted cash flow methods, such as the payback period and accounting rate of return, and discounted cash flow methods, including internal rate of return (IRR) and net present value (NPV), providing insights into their applications and limitations in financial decision-making. The report concludes by summarizing the key findings and emphasizing the importance of these tools in business decision-making and investment analysis.

Written test & reports

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Question 1....................................................................................................................................1
Tally and computation of frequency table...................................................................................1
Question 2....................................................................................................................................1
Computation of mean, median, mode, Range, Variance and standard deviation........................1
Question 3....................................................................................................................................3
Network diagram.........................................................................................................................3
Question 4....................................................................................................................................4
Computation of payback period...................................................................................................4
Question 5....................................................................................................................................4
Discuss two Non-Discounted cash flow methods for investment appraisal................................4
Question 6....................................................................................................................................5
Discuss two discounted cash flow methods for investment appraisal.........................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business decision making is considered as one of the essential aspects into their success.
Moreover, within business the decision making is undertaken as the procedures of developing
choices through determining decision accumulating information as well as evaluating
alternatives solutions (Baur, Hong and Lee, 2020). Within respective report, frequency table,
mean, median, mode, range, variances and standard deviation are computed. Moreover, payback
period are also calculated. Apart from this, Non-Discounted and discounted cash flow methods
for investment appraisal also discussed in this report.
MAIN BODY
Question 1
Tally and computation of frequency table.
Number Tally Frequency
2 II 2
3 I 1
4 IIII 4
5 IIII 4
6 IIII 4
7 II 2
Question 2
Computation of mean, median, mode, Range, Variance and standard deviation.
MEAN
7
11
11
15
20
20
1

28
29
35
15
36
54
22
45
32
11
15
= 406 / 17
= 23.88
MEADIAN
7, 11, 11, 11, 15, 15, 15, 20, 20, 22, 28, 29, 32, 35, 45, 54.
MODE
=11, 15 & 20
RANGE:
54 – 7 = 47
VARIANCE
Formula: Σ (x - x̅)2 / n
X x̅ X- x̅ (x - x̅)2
7 23.8 -16.8 282.24
11 23.8 -12.8 163.84
11 23.8 -12.8 163.84
15 23.8 -8.8 77.44
20 23.8 -3.8 14.44
20 23.8 -3.8 14.44
28 23.8 4.2 17.64
29 23.8 5.2 27.04
2

35 23.8 11.2 125.44
15 23.8 -8.8 77.44
36 23.8 12.2 148.84
54 23.8 30.2 912.04
22 23.8 -1.8 3.24
45 23.8 21.2 449.44
32 23.8 8.2 67.24
11 23.8 -12.8 163.84
15 23.8 -8.8 77.44
Total 2785.88
Variance = 2785.88 / 17 = 163.87
Standard Deviation
= √ Σ (x - x̅)2 / n
= 12.80
Question 3
Network diagram
Question 4
Computation of payback period
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Machine X
Cash flows
1 10000 10000
2 10000 20000
3 10000 30000
4 10000 40000
5 10000 50000
6 10000 60000
7 10000 70000
8 10000 80000
9 10000 90000
10 10000 100000
Payback Period 25000 / 10000 2.5 year
Question 5
Discuss two Non-Discounted cash flow methods for investment appraisal.
Some non discounted cash flow methods are described below:
Payback period: This is considered as the period that would be undertaken through entity
for repaying an investment. For example, if firm which determined either to buy new machinery
or not thereafter the management would required to identify that how longer does this takes for
bringing its funds back from cash flows that is developed through assets (Dhavale and Sarkis,
2020). Moreover, the approximation become simple as well as payback period would be
explained in years.
The key advantage of this is, it is one of the elegance methods. Moreover, this is also a
convenient manner for determining a various projects and thereafter opts the best one with
shortest payback period. Furthermore, there are several theoretical as well as realistic drawbacks
of payback period. So, the key essential drawback of payback period is that it does not undertake
capital time value under considerations. Additionally, cash flows gained at the time of initial
project period which has huge weights in comparison to cash flows in upcoming years. Two
businesses might have similar payback period but project have much cash flows within early
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years whereas another project have greater cash flows into later years. At respective
circumstances, payback would not has certain explanation of project that have to be undertaken.
Accounting rate of return: It is considered as the return rate percentage that is anticipated
from projects or assets related to original investment expenditures. Generally, respective method
is employed for undertaking an options (Gayah, Gao and Nagle, 2020). For this, in case firm
have undertaken either to go with certain investment, either it is project or buy, an average rate
of return anticipation would assists in determining whether to move further is effective.
Respective method intent for equating a proposed project along with cost effective project or
another business that are similar in nature. Moreover, approaches develop it simple for grasping
as well as quantifying payback period. In addition to this, it also enables that the investment is
done over whole financial project period. Additionally, it facilitates a direct feasibility picture of
particular project. Also, it enable firm for gathering net incomes that is gain from taxes as well as
depreciations. Beside this, the approach is undertaken to disrespect time factor while opting an
alternative usages of funds. Moreover, it is understandable that respective method do not taken
into consideration extrinsic variable which impeding the potential project profitability making.
Along with this, the individuals would not obtain various results if returns on investment as well
as average rate of return are evaluated individually. Also, it does not undertake any cash flows as
well as in only undertaken with accounting gains. Additionally, only ARR method is not required
for evaluating rate of return (Gorshkov and et. al., 2020). Also, cannot perform project in which
expenses instalments has been facilitated above two times as well as into various sections. In
addition to this, various investment periods are not recognised through effective system.
Furthermore, when evaluating annual earning, investment life is undertaken.
Question 6
Discuss two discounted cash flow methods for investment appraisal.
For investment appraisal, there are some discounted cash flows methods are discussed
below:
Internal rate of return: This is considered as rate where the net present value of investment is
zero. It is utilised when budgeting amount is evaluated how lucrative upcoming projects would
be assessed. Moreover, it is since net present value is equal to zero for whole cash flows from
provided projects. Along with this, internal rate of return is ascertained in similar manner as
computation utilised for NPV. Thus, in context of computing whatever IRR is equivalent for
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utilising formula, so the individuals should actually set net present value to nil and resolve
discounting rate (Yang, 2020). In converse manner, internal rate of return is generally not
evaluated in analytical way whether through advanced system of computer. Generally in which
project have higher IRR, it is much efficient for participate into projects. Also, various business
or individuals utilises IRR for scoring project aspects that is open for making much optimum
options to develop.
Internal rate of return is computed as identified interest rate in which present cash flow
potential value is equal to required capital investment. Moreover, it assures that whole balances
of cash flows to be provided equally when gazing at money value from the perspective of time.
Along with this, internal rate of return is also undertaken as easy metric for determining this.
Additionally, the understanding that they provides make it possible for contrasting the
effectiveness or value of several projects which might be undertaken at any particular period.
Beside this, while anticipating IRR, cost of capital is not anticipated for evaluation. Moreover, it
is also undertaken as hurdle rate as rate of return desired for financing the projects. In addition to
this, while utilising internal rate of return for comparing projects, this is essential to highlights
that respective method do not undertakes the project complexity for comparison. It could just
equate cash flows with sum of money needed for generating cash flows. Either there are two
different projects including distinct money amount, huge projects appear to be undervalue
opposed to less projects as IRR anticipation are utilised.
Net present value: This is considered as one of the effective instruments of capital budgeting
that is utilised for evaluating the project or expenses feasibility. Moreover, this shall be
ascertained through undertaking differences among present cash inflows and outflows for certain
time duration. One of the key characteristics of respective method is that it concentrates upon teh
amount which is gained in future are valued less in compare to money into bank. Beside this, the
only problem with this is that , it incorporates assumptions related to possible free cash flows
along with business capital cost. In addition to this, NPV method is not effective while
determining projects of investment at various level. Furthermore, large project that requires
much capital have high NPV, although this do not really perform effective investment than less
one. Additionally, entity also has some other consideration for recognition (Yoo and et. al.,
2020).
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CONCLUSION
Based upon the above report, this has been concluded that Business decision making is
considered as one of the essential aspects into their success. For this, they have to utilise
effective numerical and statistical tool. Some tools are mean, mode, median, and others as these
aids them to personal as well as secondary data are accumulated appropriately for business
effectiveness. Apart from the there are some discounted as well a non discounted method which
are utilised as this helps firm to develop effective decision for investment and gain huge
profitability.
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REFERENCES
Books and Journal
Baur, D.G., Hong, K. and Lee, A.D., 2020. Bitcoin: Medium of exchange or speculative
assets?. Journal of International Financial Markets, Institutions and Money, 54, pp.177-
189.
Dhavale, D.G. and Sarkis, J., 2020. Stochastic internal rate of return on investments in
sustainable assets generating carbon credits. Computers & Operations Research, 89,
pp.324-336.
Gayah, V.V., Gao, X.S. and Nagle, A.S., 2020. On the impacts of locally adaptive signal control
on urban network stability and the macroscopic fundamental diagram. Transportation
Research Part B: Methodological, 70, pp.255-268.
Gorshkov, A.S. and et. al., 2020. Method of calculating the payback period of investment for
renovation of building facades. Stroitel'stvo Unikal'nyh Zdanij i Sooruzenij, (2), p.82.
Yang, M.H., 2020. Payback period investigation of the organic Rankine cycle with mixed
working fluids to recover waste heat from the exhaust gas of a large marine diesel
engine. Energy Conversion and Management, 162, pp.189-202.
Yoo, Y. and et. al., 2020, June. Emotional responses of tactile icons: Effects of amplitude,
frequency, duration, and envelope. In 2015 IEEE World Haptics Conference (WHC) (pp.
235-240). IEEE.
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