Investment Appraisal

Investment Appraisal ,[object Object],[object Object],[object Object]

Investment Appraisal ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],What factors need to be considered before investing in equipment such as this? Copyright: Gergely Erno, stock.xchng

Investment Appraisal ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Investment Appraisal ,[object Object],[object Object],[object Object],A fork lift may be an important item but what does it contribute to overall sales? How long and how much work would it have to do to repay its initial cost? Copyright: Loisjune, stock.xchng

Payback Method ,[object Object],[object Object],[object Object],[object Object],[object Object]

Payback method ,[object Object],[object Object],[object Object],[object Object],[object Object]

Payback Method ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],255,000 Year 3 255,000 Year 2 255,000 Year 1 Income

Accounting Rate of Return ,[object Object],[object Object],[object Object],[object Object]

Accounting Rate of Return ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Investment Appraisal ,[object Object],[object Object],£ now £ in 5 years time Which is worth more?

Net Present Value ,[object Object],[object Object],[object Object],[object Object],[object Object]

Net Present Value ,[object Object],[object Object],[object Object],[object Object]

Net Present Value ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Discounted Cash Flow ,[object Object],[object Object],[object Object],[object Object]

Discounted Cash Flow – System A NPV =139,416 285,000 Total 113,544.75 0.7569650 +150,000 6 166,513.39 0.7929209 +210,000 5 166,116.92 0.8305846 +200,000 4 130,505.61 0.8700374 +150,000 3 91,136.41 0.9113641 +100,000 2 71,599.04 0.9546539 +75,000 1 -600,000 1.00 - 600,000 0 Present Value (£) (CF x DF) Discount Factor (4.75%) Cash Flow (£) Year

Discounted Cash Flow – System B NPV = 108,802.70 285,000 Total 340,634.30 0.7569650 +450,000 6 118,938.10 0.7929209 +150,000 5 83,058.46 0.8305846 +100,000 4 73,953.18 0.8700374 +85,000 3 68,352.31 0.9113641 +75,000 2 23,866.35 0.9546539 +25,000 1 -600,000 1.00 - 600,000 0 Present Value (£) (CF x DF) Discount Factor (4.75%) Cash Flow (£) Year

Discounted Cash Flow ,[object Object],[object Object]

Internal Rate of Return ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Profitability Index ,[object Object],[object Object],[object Object],[object Object]

Investment Appraisal

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Investment Appraisal