...Estimates of future costs and benefits over the project’s life. 3 • Every business would like to do everything • But it all costs • Capital expenditure on new projects or purchases (fixed assets) needs to be planned • Capital is always rationed Scenario: • Your business wishes to expand its product line • It is considering Products A and B but it can only afford to do one. • How does it decide? What main factors affect the investment decision • How much will it cost ? Investment appraisal methods used in practice • How much will I get back ? • When will I get the income ? • 4 main techniques available ranging from simple to moderately complex MULTIPLE APPRAISAL METHODS: Non‐discounted cash flow techniques: 1. Payback period (PBP) 2. Accounting rate of return (ARR/ROCE/ROI) Discounted cash flow techniques(DCF): 3. Net Present Value (NPV) 4. Internal Rate of Return (IRR) 6 1 MBA7001 Accounting for Decision-Makers Week 6 Lecture – Capital Investment Appraisal Objectives (1)...
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...Advantages and disadvantages of internal rate of return are important to understand before applying this technique to the projects. Most projects are well analyzed and interpreted by this well-known technique of evaluation and selection of investment projects. This technique has certain limitations in analyzing certain special kinds of projects like mutually exclusive projects, an unconventional set of cash flows, different project lives etc. ADVANTAGES OF INTERNAL RATE OF RETURN: The various advantages of internal rate of return method of evaluating investment projects are as follows: Time Value of Money: The first and the most important thing is that it considers the time value of money in evaluating a project which is a big lacking in accounting rate of return. Simplicity: The most attractive thing about this method is that it is very simple to interpret after the IRR is calculated. It is very easy to visualize for managers and that is why this is preferred till the time they come across certain occasional situations such as mutually exclusive projects etc. Hurdle Rate / Required Rate of Return has Not Required: The hurdle rate is a difficult and subjective thing to decide. In IRR, the hurdle rate or the required rate of return is not required for finding out IRR. It is not dependent on the hurdle rate and hence the risk of a wrong determination of hurdle rate is mitigated. Required Rate of Return is a Rough Estimate: A required rate of return is a rough estimate being made...
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...Capital Budgeting 1. Critical profitability analysis (Exhibit 1).Additional shortcomings omitted by Faulkner Poor capital-budgeting decisions can be harmful to the Sugar Lake Refining and Processing Company as it will involve spending large amounts money to be recovered for a long time. Edwards & Ivancevich, (2011) demonstrate that the other harm would be the opportunity cost arising from not taking the opportunity and it turns that a competitor comes in. The worst effect is when poor budgeting decision is made and the firm ends up losing all or part of the invested monies simply because the proposed project did not realize the expected benefits. This can be demonstrated by concerns arising from laying off workers, having to continue to meet the fixed costs as well as the wasted funds and energies in advertising (p.277). Faulkner fears of profit being overstated are unjustified especially considering that recently Butler has had inquiries from several other grocery and restaurants willing to pay the price of the product. The company inability to supply due to optimum capacity may have been the cause by management’s failure to read the market and act favorably. A better response would be to request for a survey establishing the potential of the market. Taylor and Butler discussions on the issue of availability of space for the expansion have good insights with the suggestion of leasing the company under receivership. The best decision will be reached not by appreciating the...
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...H00112703 INTERNATIONAL BUSINESS MANAGEMENT FRIDAY 08TH MARCH 2012 C38FN 2012-2013 CORPORATE FINANCIAL THEORY WORDCOUNT: 2874 Abstract This essay will discuss the net present value (NPV), payback period (PBP) and internal rate of return (IRR) approaches for a project evaluation. It is often said that NPV is the best approach investment appraisal, which I why I will compare the strengths and weaknesses of NPV as well as the two others to se if the statement is actually true. Introduction To start of, the essay will attempt to explain the theoretical rationale of the net present value approach to investment appraisal as well as its strengths and weaknesses. From there, introduce the payback period method and then internal rate of return approach, as well as to consider their strengths and weaknesses. After outlining and explaining the three different approaches, it will finish up with comparing the different three and in a conclusion. NPV Net present value or NPV is an approach used to determine the value of an investment today (present) compared to the value of the investment in the future after taking the inflation and return into account. In simpler words, it compares the value of 1 pound today with the same pound in the future. Net present value is used in capital budgeting to analyze the profitability of an investment. It is usually calculated using tables and spreadsheets such as Microsoft Excel, but the main formula used to calculate net present value...
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...AN APPRAISAL OF CAPITAL BUDGETING TECHNIQUES (A CASE STUDY OF FORTHRIGHT SECURITIES AND INVESTMENT LIMITED, MARINA, LAGOS) BY OLOJOTUYI OLUFEMI O. FPA/AC/09/3-0101 BEING A PROJECT REPORT SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCY SCHOOL OF BUSINESS STUDIES, THE FEDERAL POLYTECHNIC, ADO EKITI EKITI STATE IN PARTIAL FULFILLMENT OF REQUIREMENTS FOR THE AWARD OF HIGHER NATIONAL DIPLOMA IN ACCOUNTANCY DECEMBER, 2011. CERTIFICATION This is to certify that this research project was duly carried out by OLOJOTUYI OLUFEMI O. of the Department of Accountancy, School of Business Studies Federal Polytechnic, Ado Ekiti, Ekiti State and accepted as meeting part of the requirements for the award of Higher National Diploma in Accountancy. ……………………………… ……………………………. MR. UCHEFUNA D.I MRS. M. OLOWOLAJU Project supervisor H. O.D Accountancy …………………………….. …………………………….. DATE DATE DEDICATION This project work is dedicated to Almighty God and to my parent Mr. and Mrs. Olojotuyi. ACKNOWLEDGEMENT I give glory to God, for his guidance, protection and strength throughout the period of this project work. Thanks to my supervisor, Mr. Uchefuna D.I who has been of tremendous help in guiding and encouraging me through this process. Furthermore, for his serious yet gentle commitment to the completion of this...
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...Types of Projects, 1.5: Project scope triangle 1.6: Characteristics of a Project 2. Project management life cycle 2.1: Scoping the project 2.2: Planning 2.3: Launching the plan 2.4: Monitoring and controlling 2.5: Closing out the project 3. Project manager skills and competencies 3.1: Classifying Project Managers 3.2: Skills and competencies 3.3: Business Achievement Competencies 3.4: Problem-Solving Competencies 3.5: Influence Competencies 3.6: People Management Competencies 3.7: Self Management Competencies, 4 Management organization/ organization structure 4.1: Pure Functional structure o Advantages and disadvantages 4.2: Pure Project Structure o Advantages and disadvantages 4.3: Matrix structure o Advantages and disadvantages 5. Scheduling 5.1: Precedence analysis 5.2: Gantt Charts 5.3: PERT / CPA 6. Budgeting 6.1: Introduction to Budgeting 6.2: Types of budgeting 6.3: Budgeting Approaches a. Top...
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...CHAPTER ONE Introduction Understanding and being able to use capital budgeting techniques and investment appraisal tools is usually a standard requirement for most business degrees. In addition learning such methods will also give one an advantage in a real business situation, in which there is the consideration of significant capital expenditure project. Capital budgeting assists management decisions making on the process of ensuring growth of the organization. The techniques are divided into two types: one, Traditional (non-discounting) that includes pay back method, accounting rate of return (ARR). Two, discounting cash flow that includes net present value (NPV), internal rate of return (IRR) Profitability Index (PI). Before an investment appraisal is conducted, there are a number of points to keep in mind. Whilst the tool presented will give an evaluation of the worth of a project, one should consider that the answer is only a guide. In short, the results of an investment appraisal should be considered in conjunction with both common sense and other qualitative factors such as a business’s overall strategy. Secondly, before an investment appraisal is conducted, one should consider whether or not the project is mutually exclusive. Where a project is mutually exclusive, then only the best project should be selected. Where on the other hand, projects are independent; one may select all projects which give the appropriate return. 1.1 Background of the study Corporate finance...
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...5400 × 0.467 = 2521.8 9 4400 × 0.424 = 1865.6 10 2000 × 0.386 = 772 9186.4 Due to NPV method, the final results show that both investments show positive answer and are possible. Comment and Suggestion I can tell Both Beer Chang Project and EduCare are acceptable based on these calculations with NPV method. But we cannot do both of them at the same time. We have to choose the most possible project. According to this calculation, EduCare can make more profit more than Beer Chang can get. This is the fact, why we have to choose EduCare Service. 1. Investment Appraisal Methods There are four types of Investment Appraisal methods. They are- 1. NPV (Net Present Value) 2. PBP (Pay Back Period) 3. IRR (Internal Rate of Return) 4. ARR (Accounting Rate of Return) Among them, NPV (Net Present Value) method is the best way to estimate the profit of the venture. Among these four Investment Appraisal methods in evaluating investment proposals, I prefer NPV (Net Present Value) method most. Because while the other methods ignore the time value of...
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...MSc Biotechnology, Bioprocessing & Business Management 2014/15 Module name and number Fundamentals of Biotechnology: BS934 Assignment title Antimicrobials Student Number 1464986 Word Count 2470 The article will initially cover conventional antibiotics and how their abuse led to antibiotic resistance in bacteria. Alternative antimicrobials will be reviewed by taking into consideration their mechanisms of action and how they can represent a viable option to address the issue of antibiotic resistance. Antimicrobial Background ------------------------------------------------- Figure 1: Structure of penicillin and β-lactam ring (Adapted from LNLS, 2013) ------------------------------------------------- Figure 1: Structure of penicillin and β-lactam ring (Adapted from LNLS, 2013) Antimicrobials are substances that kill or suppress microorganisms such as bacteria, fungi and viruses (EPA, 2014). The first evidence of antimicrobials dates back to the Egyptians who used mouldy bread to treat surface infections (Wainwright, 1989). At the beginning of the 20th century, Paul Ehrlich synthesized the first antimicrobial agent known as Salvarsan, a drug used for treating syphilis (Aminov, 2010). Successively Alexander Fleming discovered penicillin by noticing that the growth of Staphylococcus aureus was inhibited in presence of the mold produced by Penicillium fungi. This led to the conclusion that microorganisms produce substances to limit...
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...Community Based Policing DeVry University Prof. B. Griffin April 5, 2012 Introduction “Community institutions are the first line of defense against order and crime…”Thus it is essential that the police work closely with all facets of the community to identify concerns and to find the most effective solutions. This is the essence of community policing (Kelling, 1988). Community policing is a value system in which the ultimate goal is working cooperatively with individual citizens, groups of citizens, and both public and private organizations to identify and resolve issues which potentially affect the livability of specific neighborhoods, and areas within the city (Cassady, 2012). Community-based police departments recognizes that that the police cannot effectively deal with such issues alone, and must partner with others who share a mutual responsibility for resolving problems. Community policing stresses prevention, early identification, and timely intervention to prevent issues before they become a problem. Community policing is both a philosophy (a way of thinking) and an organizational strategy (a way to carry out the philosophy) that allows the police and the community to work together in new ways to solve problems of crime, disorder and safety issues to improve the quality of life for everyone in that community (Wilkerson, 2006). Community policing consists of two core components, community partnership and problem solving which is the foundations of a successful...
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...qwertyuiopasdfghjklzxcvbnmqwertyui opasdfghjklzxcvbnmqwertyuiopasdfgh jklzxcvbnmqwertyuiopasdfghjklzxcvb AF301 ACCOUNTING THEORY nmqwertyuiopasdfghjklzxcvbnmqwer & APPLICATIONS tyuiopasdfghjklzxcvbnmqwertyuiopas dfghjklzxcvbnmqwertyuiopasdfghjklzx Group Seminar Report cvbnmqwertyuiopasdfghjklzxcvbnmq TOPIC:2 – CORPORATE SOCIAL wertyuiopasdfghjklzxcvbnmqwertyuio & ENVIRONMENTAL REPORTING pasdfghjklzxcvbnmqwertyuiopasdfghj klzxcvbnmqwertyuiopasdfghjklzxcvbn mqwertyuiopasdfghjklzxcvbnmqwerty uiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdfghjklzxc vbnmqwertyuiopasdfghjklzxcvbnmrty uiopasdfghjklzxcvbnmqwertyuiopasdf ghjklzxcvbnmqwertyuiopasdzxcvbnm STUDENT NAME MELISA SINGH ASHVINI SAHAYAM SHABINA FARNAAZ SHANEEL PRASAD KRITHNEEL SINGH TOTORIAL DAY / TIME TUTORS NAME GROUP MEMBERS STUDENT ID NUMBER S11066108 S11065177 S11065043 S11065627 S11065615 THURSDAY 8 – 10AM MISS FAZEENA HUSSAIN TABLE OF CONTENTS DECLARATION OF ORIGINALITY ........................................................................................... 3 ACKNOWLEDGEMENT .............................................................................................................. 4 IMPORTANCE OF ACCOUNTING FOR SOCIAL AND ENVIRONMENTAL ISSUES ......... 5 INTRODUCTION .......................................................................................................................... 6 THEORETICAL UNDERPINNING ...........................................
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...Question 1(a) To be listed on a recognized stock exchange, a company must go through an initial public offering (IPO) ，which is the first sale of stock by the company to the public. Private listed companies or small firms that are planning to expand the growth of their company often use an IPO as a way to generate and raise the capital needed for their company expansion. Although further expansion is beneficial to the company and its shareholders, there are both advantages and disadvantages that will arise when a company is listed on a stock exchange. There are many advantages for a company to be listed on a stock exchange. First of all, the financial benefit in the nature of raising capital from the public is the most attractive advantage. The capital raised can be used to fund the expansion and development of the company, fund capital expenditure or even used to pay off existing debt. Another advantage is market exposure; having a company listed on a stock exchange could attract the attention of mutual and hedge funds, market makers and institutional traders. This can increase the public awareness and popularity of the company, therefore making their products known to a new group of potential customers. Enhancing the brand name and goodwill is also an advantage of listing a company on a stock exchange. This can also increase the credibility of the company with the public, having the company indirectly endorsed through having their stock traded on the exchange. Listing in...
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...Q.No. | Question | Options | Answer | 1. | The theoretically logical and operationally feasible normative goal for guiding financial decision making is | 1. | profit maximization | 2 | | | 2. | wealth maximization | | | | 3. | dividend maximization | | | | 4. | sales maximization | | | | 5. | - | | 1. | Your company has received a $50,000 loan from an industrial finance company. The annual payments are $6,202.70. If the company is paying 9% interest per year, how many loan payments must the company make? | 1. | 12 | 3 | | | 2. | 19 | | | | 3. | 15 | | | | 4. | 13 | | | | 5. | - | | 1. | Which of the following statements is true? | 1. | With perfect negative correlation, the risk on a portfolio can be zero if an appropriate allocation of funds is made | 1 | | | 2. | In cases of zero correlations between the assets, risk can be fully eliminated through diversification | | | | 3. | The degree of risk reduction for a portfolio depends only on the number of securities in the portfolio | | | | 4. | All of the above | | | | 5. | - | | 1. | The present value of a single future sum: | 1. | depends upon the number of discount periods. | 1 | | | 2. | increases as the discount rate increases. | | | | 3. | is generally larger than the future sum. | | | | 4. | increases as the number of discount periods increases. | | | | 5. | - | | 1. | The...
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...School of Management Blekinge Institute of Technology THE IMPORTANCE OF THE PAYBACK METHOD IN CAPITAL BUDGETING DECISION. By Alaba Femi, AWOMEWE & Oludele Olawale, OGUNDELE Supervisor: Anders Hederstierna Thesis for the Master’s degree in Business Administration Fall/Spring 2008 THE IMPORTANCE OF THE PAYBACK METHOD IN CAPITAL BUDGETING DECISION. By Alaba Femi, AWOMEWE & Oludele Olawale, OGUNDELE A thesis submitted in partial fulfillment of the requirements for the degree of MBA (Master of Business Administration) Blekinge Institute of Technology 2008 Supervisor Anders Hederstierna ii Abstract Title: The importance of the Payback method in Capital budgeting decision. Authors: Alaba Femi, Awomewe and Oludele Olawale, Ogundele Supervisor: Anders Hederstierna Department: School of Management, Blekinge Institute of Technology Course: Master’s thesis in business administration, 15 credits (ECTS). Background and Problem Discussion: The capital budgeting decision has been a very typical issue in the sustenance of a company. Several companies have lost their identity or liquidated due to wrong capital budgeting decision they made at one particular time or the other. Based on these prevalent problems in industries and the effect of globalisation on industries, it is important to use effective method to analyse investment before decision is made. Capital budgeting is extremely important because the decision made involve the direction...
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...Abstract Environmental costing serves as a mechanism for identifying and measuring the full spectrum of environmental costs of current production processes and the economic benefits of pollution prevention or cleaner processes, and to integrate these costs and benefits into day-to-day business decision-making. For the last decade, environmental accounting has gained increased importance in practice, of which cost accounting receives most attention. This paper gives an overview of the approaches of environmental cost accounting. Key Words: Environmental costing, Environmental costs, Environmental accounting Introduction In recent years, Environmental Costing has been attracting increasing attention throughout the world. There are various definitions of environmental costing, but essentially, an environmental costing system can be thought of as a management accounting system that has been refined so as to enable users of the system to be provided with information that reflects the environmental performance of the organisation. The United Nations Division for Sustainable Development has referred to environmental costing simply as “doing better, more comprehensive management accounting, while wearing an environmental hat that opens the eyes for hidden costs”. The information generated from an environmental management accounting system might be of a financial nature (for example, the quantification of environmental costs), or it might be provided in physical terms (such...
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