UNIVERSITY / INSTITUTE: UNIVERSITY OF GLAMORGAN
CLASS / COURSE: EED324
A company is considering 3 possible projects; A, B and C. The financial details related to each are provided below:
Project A: Investment in a product development which is anticipated to require £80,000 development costs, but will return revenues of £90,000 in year 1, £200,000 in Year 2, £100,000 in Year 3 and zero thereafter. Profits are assumed to be 40% of the sales revenues.
Project B: Investment in an IT upgrade that will improve company effectiveness. The investment cost is expected to be £200,000, but will enable the company to save scrap of £30,000 per year and reduce its salary costs of £40,000 per year. The life of the IT system is anticipated to be 4 years.
Project C: Investment in a project to increase the usable life of a production line. The current line cost £300,000 5 years ago, and by a new investment of £100,000 its life can be extended for another 4 years. Currently the line produces products which realise a profit of £40,000 per annum.
The discount rate to be considered is a minimum of 10%.
a) Discuss 3 alternative distinct methods for ranking projects using financial analysis, and advise which of these methods is advised as the “best” recommended method. (30 marks)
b) Using 3 separate and distinct financial evaluation method, advise management as to which option is the preferred investment. (Show all calculations in your answer) (70 marks)
As for as word limit is concerned, teacher has not specified that. in this first you need to explain 3 alternative distinct methods for ranking projects, then explaining which one is the best recommended method. I think this first part would be about 3-4 pages double spaces. Please explain in details. after that in second part you need to use these three methods on each three projects given for analysis, that means total 9 times numerical analysis. Finally make an output table of all three projects from three methods so that you could show everything output in a single table. then write about your analysis and show in analysis how and why best recommended method explained in first part is the preferred one over other methods. I think this last analysis also needs to be about 2 pages. And 3-4 pages for calculations of all three projects with each three method. Total around 8 to 10 pages report. Please tell me if you are very well understood with the project requirements and able to produce very good report. You can also refer to grading criteria given in the assignment details.
There are several methods of measuring financial feasibility of a project and ranking projects on the basis of their......
SUBJECTS / CATEGORIES:
2. Financial Management
3. Corporate Finance