K PLC Business Report: Investment Appraisal, Financing, Procurement

This business report provides a comprehensive analysis of K PLC's investment appraisal, financing options, procurement processes, and cost variance analysis. Task A evaluates potential projects using payback period and net present value (NPV) methods, ranking them and recommending a mutually exclusive project based on these metrics. It also discusses the strengths and weaknesses of NPV and payback methods, along with qualitative factors for decision-making. Task B explores three alternative financing methods: bank loans, angel investors, and government grants, discussing their linkages and implications. Task C presents standard and actual data, calculating variances and suggesting possible explanations for them. Task D distinguishes between centralized and decentralized procurement, discussing the benefits of each approach. The report concludes with a summary of key findings and recommendations, offering insights for K PLC's strategic decision-making. Desklib provides access to similar business reports and study tools for students.

Business report

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK A...........................................................................................................................................3
a) Calculation of Payback period for all projects........................................................................3
b) Calculation of Net present value for all projects. ..................................................................4
c) Ranking the projects on the basis of payback and net present value......................................4
d) Which project may be selected if projects are mutually exclusive? Explain your
recommendation..........................................................................................................................5
e) Discuss the strengths and weakness of net present value and payback methods in the
context of investment appraisal...................................................................................................5
f) Discuss five qualitative factors which the directors may need to consider before making a
final Decision..............................................................................................................................5
TASK B ..........................................................................................................................................6
a) Three alternative methods of Funding....................................................................................6
b) Discuss how the above financing decisions are linked with each other.................................7
TASK C...........................................................................................................................................7
a) Table presenting Standard and actual data..............................................................................7
b) From the available information suggest possible explanations for the variances identified.. 8
TASK D...........................................................................................................................................9
Distinguish between centralised and decentralised procurement. Discuss the benefits of
centralised purchasing and decentralised purchasing.................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business report alludes to a progression of data about an organization's tasks, creation
and experiences regarding what the organization plans for future. This report contains for the
most part the verifiable information about the organization's working. It helps the various clients
of this report to fundamentally investigate the choices that they are accessible with to make a
choice. It is taking future choices on the genuine chronicled information present in the business
report (Hartzell and Baum, 2021). In this report, the principle center is around the different data
which is bookkeeping and functional of K plc. The report is partitioned into four sections,
section A explores the undertakings which K plc. ought to put resources into. Part B discusses
the financing that the organization can go with. Part C assesses the organization's expense
differences and Part D features the overall outline of unified and decentralized attainment.
TASK A
a) Calculation of Payback period for all projects.
Payback period = Initial investment / Annual Cash flow
Table showing calculation of Payback period of Projects A-F
PROJECT Initial investment / Annual Cash flow Payback Period
A 1,000,000 / 300,000 3.33 Years
B 400,000 / 100,000 4 Years
C 700,000 / 200,000 3.5 years
D 614,500 / 100,000 6.15 years
E 500,000 / 120,000 4.17 years
F 560,000 / 100,000 5.6 years
Project G (Using Cumulative cash flow)
YEAR ANNUAL CASH FLOW CUMULATIVE CASH FLOW
0 -200000 -200000
1 100000 -100000

2 100000 0
3 20000 20000
4 20000 40000
5 20000 60000
6 20000 80000
Payback period for Project G = Initial Investment / annual cash inflows
Payback period = 200000/100000
= 2 years
b) Calculation of Net present value for all projects.
NPV= (Annual Cash Flow * Annuity value) – Initial investment
Project Initial
Investment(A)
Annual cash inflow
(B)
Annuity value
(C)
NPV (C*B)-A
A 1000000 300000 4.36 306590
B 400000 100000 3.17 83010
C 700000 200000 3.79 58160
D 614500 100000 6.14 40
E 500000 120000 4.87 84208
F 560000 100000 6.41 54460
Project G= (Solution using PV factor)
Cash flows of project G PV factor PV cash flow
100000 0.'909 90900
100000 0.'826 82600
20000 0.'751 15020

20000 0.'683 13660
20000 0.'620 12400
20000 0.'564 11280
TOTAL 225860
c) Ranking the projects on the basis of payback and net present value.
Project Rank on the basis of Payback period Rank on the basis of Net present value
A 2 1
B 4 7
C 3 3
D 7 6
E 5 2
F 6 4
G 1 5
The ranking is done on the basis of Payback period and Net present value. Pay back
period ascertains the time in which the initial investment can be recovered and NPV is the value
of future inflows at present.
d) Which project may be selected if projects are mutually exclusive? Explain your
recommendation.
From the above rankings it can be been that project G has lowest pay back period as
compared to others, initial investment will be recovered fastest in this case. NPV is highest of
project A which means that the maximum value is derived from this project. Project A suits both
the criteria as the pay back period is 3.25 years and NPV is highest in this project.

e) Discuss the strengths and weakness of net present value and payback methods in the context
of investment appraisal.
Pay Back Period Net Present Value
Strengths It mainly focus on the time
period in which the initial
amount invested is paid back.
This method mainly accounts
the time value of money.
Weakness This method does not consider
the time value of money.
NPV is not considered in
comparison of different size
projects.
f) Discuss five qualitative factors which the directors may need to consider before making a final
Decision.
The following are the quantitative factors that helps in investment plan,
 Morale : What should be done to increase the morale of the employes.
 Customer: Who are the customers targeted by the planned project.
 Investors: What the investors thinks about the proposed project.
 Community: Which part of the community is targeted by the group.
 Products: What products the company will introduce with the new investement.
TASK B
a) Three alternative methods of Funding.
The three alternatives of the funding for a business are discussed below:
 Bank Loans- Bank Loans alludes to the money expansions that have been given by the
banks to the organizations. These assets are stretched out to the business on an insurance
security. The organization who utilizes these assets are needed to pay the interest on these
assets throughout some stretch of time (Howe, 2019). The chief sum is needed to be
taken care of after the period which has been decided by the bank and the organization.
The highlights of this are: It is a short term source of funds. The organization is needed to
repay inside a monetary bookkeeping period. The bank credit can be achieved in
condition relying on the requirements of the business. The premium which is charged by

the bank can be fixed or variable (Huysegoms, Rousseau and Cappuyns, 2019). Home
loan of some sort or another is needed to be given by the business to utilize the assets. K
plc can go with this kind of money as the organization needs to buy the portions of an
organization at a place of time and doesn't need any proceeded with stream of assets. The
primary benefit of utilizing such money is that these assets can be considered as a short or
medium term financing.
 Angel Investors- These alludes to the financial investors who offer huge measure of cash
to the organizations with respect to the assets gave the organization needs to give a few
level of the possession to these financial investors (Nkundabanyanga, Muhwezi and
Tauringana, 2018). The principle benefit of this sort of subsidizing is that these
individuals gets the responsibility for business which implies they won't request that the
business pay back these funds in a near future and K plc., can utilize these assets
productively.
 Government grants and loan- The public authority can supply resources for a business in
the sort of a aid. A aid is required to help financial turn of events, to boost economic
development or to stimulate query for a specific manufacture (Pehlivan and Öztemirn
2018). Choices will shift contingent upon the business. K plc., can go for this wellspring
of assets on the off chance that it is working underway of such a thing which is a vital
decent. The primary benefit of this is that the business can utilize these assets adequately
throughout some undefined time frame and government can either make these credits free
or request a low pace of interest.
b) Discuss how the above financing decisions are linked with each other.
The financing decisions of the business are linked to each other in a way that provide
finances to the business (Manzone, 2018). These different decisions of the business provides
clarity to the different users of the financial information about how they can act to the best
interest of the organisation and for themselves. The main advantage of the financing decision and
the different sources of finance is to that the business does not always have to depend on its
profits to grow its business but they can simply raise funds from these different sources of
finance. The major disadvantage of these sources of finance is that it increases the cost of the
business and the business is required to pay off these debts and capital after a certain pointy of
time.

TASK C
a) Table presenting Standard and actual data
Particulars Standard
price
Standard
quantity
Standard cost Actual price Actual quantity Actual cost
Direct Material 3 10000 30000 3.5 8500 29750
Direct Material 2 10000 20000 1 18000 18000
Direct Labour 10 30000 300000 10.5 28000 294000
Variable
Overhead
18 10000 18000 18.3 9000 165000
Working Notes :
(I) Material cost variance(MCV) : Standard cost – Actual cost
(SQ*SP) - (AQ*AP)
S : (10000*3) – (8500*3.5) = 30000 – 29750 = 250
T : (10000*2) – (18000*1) = 2000
(II) Material price variance(MPV) : (Actual quantity purchased*Actual unit cost) –
(Actual quantity purchased*Standard unit cost)
S : (8500*3.5) – (8500*3) = 29750 – 25500 = 4250
T :(18000*1) – (18000*1) = 18000 – 18000 = 0
(III) Material usage variance(MUV) : (Standard quantity of material produced – Actual
quantity used)*Standard price per unit
S : (10000 - 8500)*3 = 4500
T : (10000 – 9000)*2 = 2000
(IV) Labour rate variance(LRV) : Actual time(Standard rate – Actual rate)
28000(10 – 10.5) = (14000)
(V) Labour cost variance(LCV) : Standard cost – Actual cost
(Standard hour*Standard price) – (Actual hour*Actual price)
(30000*10) – (28000*10.5) = 300000 – 294000 = 6000

(VI) Labour efficiency variance(LEV) : Standard rate(Standard time – Actual time)
10(30000 – 20000) = 20000
(VII) Variable overhead variance(VOV) : Standard variable overhead – Actual variable
overhead
180000 – 165000 = 15000
b) From the available information suggest possible explanations for the variances identified.
Variances can be explained to assess , calculate , estimate and predict the reasons for
under or over sales and demand. They are helpful in management , business , organisation as
well (Marttonen-Arola and et.al., 2020). It is helpful to ascertain the difference between actual
and standard expenditure & income. Variance helps to understand working , maintenance and
having proper control over project's expenses by comparing standard performance with actual
performance. It helps to manage annual budgets & have a proper record of costs and revenue
incurred for the year. Cost variances can be defined as a process of assessing the financial
performance of business, organization , management , project (Persaud, 2021). It helps
companies to compare budget set for carrying out operations and what actually was spent i.e. the
variance/difference. It is useful for business organisations & management to take in account such
variances as it highlights useful information regarding the period and project.
TASK D
Distinguish between centralised and decentralised procurement. Discuss the benefits of
centralised purchasing and decentralised purchasing.
Centralised Procurement Decentralised Procurement
The dynamic abilities are assigned all through
numerous levels
The choices making right are just with the top
experts in the organization.
In this, the workers are profoundly energetic
in light of the fact that there is the conceivable
outcomes of preference.
The workers remain demotivated as they have
no privileges and there is no possibility of the
preference.
There is more prospects of controversy in
choices among the individuals.
There is less clash among the individuals since
they are not included in the dynamic cycle.
The weight can be divided between the many In this, the weight is just on one level rather the

levels. many levels.
There is inclined to unsteadiness due to the
numerous conflicting choices.
It is moderately steady in light of the fact that
the choices are taken by the focal authority
with sharing the normal philosophy.
In this the decision-making cycle occurs
rapidly and does not delay.
In this, the dynamic interaction is exceptionally
sluggish as less individuals have this
opportunity.
The progression of data is open and free There is upward progression of the
informations.
The purchasing control is adequately worked
out
There isn't any successful control on
purchasing process.
Advantages of centralised and decentralised procurement:
 Lowered prices due to the economies of scale
 Fewer legal risks to the business
 Supports the public policy
 Provides better products
 Lowers the overhead costs.
CONCLUSION
From the above mentioned report it can be concluded that a business report is an
important aspect which helps many users of the business information to take diversified
decisions. It provides full knowledge about how the business plans to work and how the business
plans on enhancing their performance in the market place. The above report highlights how the
investment proposal of the business how gives information about the project being viable for the
business or not. Variance cost analysis is also discussed in the report with calculations of
different variances. At last the report highlights the two types of procurement which is used by
businesses in its operations and operational efficiency.

REFERENCES
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