Financial Project Report: Investment Analysis of Shelton Mills Plc

This report presents a financial analysis of an investment project for Shelton Mills Plc, an electricity provider in the UK. The analysis evaluates the project's financial viability by examining initial investments and relevant cash flows, incorporating a cost of capital of 12%. Key accounting techniques such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period are used to assess profitability. The project demonstrates a positive IRR of 18.32% and an NPV of £111.16, with a payback period of 4.11 years, indicating a potential for wealth creation for shareholders. The accounting profit is calculated at 33.96%. The report recommends accepting the project, emphasizing the importance of considering scenario analysis for expected cash flows. Overall, the analysis suggests that the project will generate positive cash flows and enhance shareholder wealth.

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Author’s Note:

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756 Wall Street,
Melbourne, VIC 3650
Telephone [phone]
www.mckenzieandassociate.com.au
30th November 2018
Mr. Tom Kirkman
To,
The Managing Director
Shelton Mills Plc.
Level 6, Auburn, AL 36830
Adelaide SA 6879
Dear Mr Pewter,
The analysis of the project included evaluating the initial investments done and the relevant
cash flows flowing from the investment done. The analysis done for the project was based on
assessing the financial viability for the project. The cash flows were analyzed for the company
after evaluating the net cash flows of the company. The key factors taken into consideration for
evaluating the project was incorporating the cost of capital for the company which was assumed

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at 12%. The net cash flows were generated after incorporating the net sales and the key expenses
of the company.
Some of the accounting techniques and tools used for evaluating the financial viability
and assessing the profitability application of Net Present Value, Internal Rate of Return and
Payback period were evaluated for the project. The project seems profitable and the internal rate
of return generated from the project was around 18.32% showing that the same can create wealth
for the shareholders of the firm. The internal rate of return expected from the project is greater
than the cost of capital of capital for the firm which shows a profitable indication for the project.
The net present value generated from accepting the project would be around £111.16. This shows
the discounted cash flows flowing to the shareholders of the company who will be getting the
same when the project is accepted. The payback period for the project shows the recovery of the
initial amount spend by the company for the project. The payback period for the project was
around 4.11 years which shows that the initial investment would be recovered in 4.11 years. The
accounting profit calculated for the project was around 33.96% that shows the average rate of
return and measures the rate of return from a project during the time of the investment. The
project should be accepted and the relevant cash flows will create wealth for the stakeholders of
the company. However, it should be noted that there are other factors, which are crucial for the
analysis, which is including and applying the scenario analysis for the expected cash flows. Thus
after assessing all of the important accountability ratio and tools the project indicate a positive
cash flows accruing to the stakeholders and shareholders of the company and the acceptance of
the same will result in the creation of the wealth of the shareholders.
In case if you have any more concerns or query to follow up, please get in touch with us through
our registered official email id or contact numbers.

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Yours Sincerely
Accountant
McKenzie and Associates
Enclosure: Response for Query
Cc: Maria McKenzie

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Bibliography
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Magni, C.A. and Martin, J., 2017. The Reinvestment Rate Assumption Fallacy for IRR and NPV.