StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Financial Appraisal - Essay Example

Cite this document
Summary
C. The comments of directors are very much inconsistent. Based on definition, NPV is the present value of future cash flows after deducting the initial capital outlay. The higher the NPV is, the higher the return. On the other hand, the IRR is the discount rate that will make NPV zero…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98.9% of users find it useful
Financial Appraisal
Read Text Preview

Extract of sample "Financial Appraisal"

Part A. Calculate the NPV and IRR of each project. Project X Project Y NPV $29,196.6 $18,554.2 IRR 16% 18% B. Project X should be undertaken because it has higher returns indicated by the higher NPV and the lower IRR.C. The comments of directors are very much inconsistent. Based on definition, NPV is the present value of future cash flows after deducting the initial capital outlay. The higher the NPV is, the higher the return. On the other hand, the IRR is the discount rate that will make NPV zero.

The higher the NPV, this means that IRR is lower. Thus, we cannot choose a project with both higher NPV and IRR.D. Payback's advantages include simplicity and straight-forwardness. However, it neglects cash flows after the payback period and time value of money. For ARR, the formula is also simple and easy to understand. However, it neglects time value of money and focuses on profit instead of cash flow.Project X Project Y Payback 3 years 1 yearARR 150% 122.5%Part 2The NPV of the project presented is -$2,146.

96Part 4 When calculating the NPV in public sector projects, additional factors should be taken into considerations. Because it deals with the public sector, the analysis should go beyond financial to measure the social costs and benefits of the project. For example, even if the project is financially feasible and will yield returns, negative externalities such as pollution should also be taken into account. It should be noted that a governmental institution and the public sector is not a profit maximize but is focused in bringing the highest level of social welfare.

Post audit appraisal is essential at the end of the life of the project in order to assess if the initial goals or projections have been adequately met. This also measures the level of understanding of the company in projecting the future of a project. Through post-audit appraisal, the company can evaluate itself on why projections did not materialize. The learning from post-audit appraisal will enable the company to apply it in future project evaluations.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Financial Appraisal Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1532607-financial-appraisal
(Financial Appraisal Essay Example | Topics and Well Written Essays - 500 Words)
https://studentshare.org/miscellaneous/1532607-financial-appraisal.
“Financial Appraisal Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/miscellaneous/1532607-financial-appraisal.
  • Cited: 0 times

CHECK THESE SAMPLES OF Financial Appraisal

Development of the Financial Appraisal Profile Model

Surveys and case studies have been conducted to pinpoint managers' feelings on the theoretical versus the practical applications of capital budgeting (sometimes termed capital investment appraisal).... Managers have a variety of financial models available to them when they appraise capital projects, so deciding which ones to use requires in depth knowledge of several and the ability to choose the financial model most applicable to the situation (Christy, 1966; Vandell &… The academic literature provides theoretical justification for discounted cash flow models; in the field, managers commonly utilize payback and accounting rate of return to appraise capital projects (Solmon, 1962; Klammer, 1972; Hasty, 1974; Academics prefer the net present value (NPV) method because it has theoretical validity; accounting managers tend to use the internal rate of return (IRR) method (Lefley & Ryan, 2005)....
6 Pages (1500 words) Essay

Capacity Planning and Financial Appraisal

The paper "Capacity Planning and Financial Appraisal" discusses that generally speaking, the cost of capital is a function of the risk-free interest rate and the risk perception associated with each type of investment.... The financial viability of the new plant is to be checked using the IRR method....
8 Pages (2000 words) Coursework

Financial Appraisal of Design Options

This essay focuses on the Financial Appraisal of design options.... Financial Appraisal of Option 1 shows a relatively-high profit of £9,291,385, 54.... The gross development value of this option is also the highest compared with the other two and its financial viability is much better as profits are the most stable among all the options....
3 Pages (750 words) Essay

The Sheffield Urban Development Framework

(see in final design) Furthermore,Financial Appraisal of Option 1 shows a relatively-high profit of £9,291,385, 54.... Sheffield is in the process of changing from its industrial feature to sustainable regeneration type.... From the map 1.... , we notice large amounts of industrial heritage around site 4....
3 Pages (750 words) Essay

Planning and Development Site Appraisal

The Financial Appraisal method selected for this exercise is the traditional residue site value (RSV) budget (Guy 2002, pg.... The paper “Planning and Development Site appraisal” discusses the site appraisal, which involves an analysis and examination of the nature of the site, including factors like proximity to infrastructural services, close developments, assets, and properties.... After this, those options will also be appraised financially by using appropriate financial methods....
5 Pages (1250 words) Assignment

Analysis of Capital Budgeting: Financial Appraisal of Investment Projects Article by Dayananda

Capital Budgeting: Financial Appraisal of Investment Projects.... Moreover, retaining workers and handling them with due diligent is one of the fundamental priorities of Mr.... Rubin.... Manufacturing pipes will enable the retention… The computation of every exhibit is mainly based on certain assumptions such as factoring in the expected value at the expense of the probable value....
1 Pages (250 words) Essay

Techniques Used by Qualitative Researchers

Section four will present the Financial Appraisal profile model (FAP).... The paper “Techniques Used by Qualitative Researchers” analyzes some of the most popular techniques: the narrative method, ideal types, successive approximation, the illustrative method, path dependency, and contingency, domain analysis, and analytic comparison....
17 Pages (4250 words) Research Proposal

Financial Appraisal of Charities and Finacial Companies

The author states that the financial statements of charities do not include accounts such as Gain or loss in investment, which on the other hand are a crucial part of the accounting and financial reporting in companies.... Consequently, the financial risks would lessen to a great extent in this manner.... Another approach could be to diversify the risk by obtaining some goods from Vital Office Furniture Limited while other goods from other suppliers, thereby reducing the overall financial risk....
8 Pages (2000 words) Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us