- C Critically Evaluate The Benefits And Limitations Of Each Of The Differing Investment Appraisal Technique 1 (119.84 KiB) Viewed 71 times
- C Critically Evaluate The Benefits And Limitations Of Each Of The Differing Investment Appraisal Technique 2 (67.12 KiB) Viewed 71 times
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rate of 13% of the original cost of the machine. The cost of capital for (PM) Limited is 9%. You are required to: (a) Calculate (to two decimal places) using the following investment appraisal techniques, and provide brief recommendations as to the economic feasibility of acquiring the machine: i. The Payback Period. ii. The Accounting Rate of Return. iii. The Net Present Value. iv. The Internal Rate of Return (20 marks) (b) Alternatively, the financial director of (PM) Limited is proposing to use 50% the total capital outlay for the above investment to repurchase some of the equity capital and the remaining funds to pay for cash dividends. Ensuring the response draws upon relevant academic research and theories within this highly topical area of financial management, critically evaluate the effects of this proposal on the company. (10 marks) (c) Critically evaluate the benefits and limitations of each of the differing investment appraisal techniques, ensuring the use of relevant academic literature.
Question 2 - Investment Appraisal Techniques Pizza Mat (PM) Limited a fast food company is considering purchasing a new storage machine for £588.5m. The company is expecting an annual cash inflow of £233.7m from the sale of its products and an annual cash outflow of £33,2m for each of the seven years of the machine's useful life. The annual cash outflows do not include annual depreciation charges for the machine. The machine is depreciated using a straight-line method. The machine is expected to last for seven years, with a residual value estimated to be at the rate of 13% of the original cost of the machine. The cost of capital for (PM) Limited is 9%. You are required to: (a) Calculate (to two decimal places) using the following investment appraisal techniques, and provide brief recommendations as to the economic feasibility of acquiring the machine: i. The Payback Period. ii. The Accounting Rate of Return. iii. The Net Present Value. iv. The Internal Rate of Return (20 marks) (b) Alternatively, the financial director of (PM) Limited is proposing to use 50% the total capital outlay for the above investment to repurchase some of the equity capital and the remaining funds to pay for cash dividends. Ensuring the response draws upon relevant academic research and theories within this highly topical area of financial management, critically evaluate the effects of this proposal on the company. (10 marks) (c) Critically evaluate the benefits and limitations of each of the differing investment appraisal techniques, ensuring the use of relevant academic literature. (20 marks)