Financial Calculations of LCJ Ltd - Case Study Example

Academic Report and Financial Calculations of “LCJ Ltd.” Executive Summary In traditional financial term, capital investment decisions are often regarded as ‘capital budgeting’ for a particular organisation. In this essay, the discussion critically suggests a major understanding about the capital investment decision for LCJ Ltd. in respect to Project A and Project B, and recommends an appropriate investment for long term sustainability. In this regard, the study examines and justifies the project that has been selected for LCJ and recommends appropriate investment decision for the firm with relevant justifications. Additionally, the project also evaluates a brief discussion about the ethical considerations that have been undertaken to determine the selection of the most appropriate project in light with relevant research. Finally, the discussion also structures and evaluates appropriate HR functional model in line with the capital investment decisions for the chosen project and recommends appropriate set of practice to enhance capital budgeting decisions for LCJ. Table of Contents Executive Summary 2 Introduction 4 Critical Evaluation and Justification of the Project Recommended for Investment 5 Evaluating Scope and Future Role of the Projects in the organisations 6 Project A: New Ticketing and Packing Machine 6 Project B: New Computerised Quality Checking System 6 Brief Analysis of the Chosen Project with Relevant Justifications 7 Financial Evaluation of the Proposed Projects 7 Critical Evaluation of the relevant theories associated with the Chosen Project 9 Rationalist Theoretical Approach 9 Non-Rationalist Theory 10 Critical Evaluation of Human Resource Function Model 11 Implication of Ulrich and Brockbank’s Updated Strategic HR Function Model 11 Conclusion 14 Recommendations 15 References 17 Bibliography 21 Appendix 23 Calculations 24 Introduction The business environment in the recent decades has been experiencing major changes due to the increasing competition of the organisations specifically because of evolution of major decisions by the marketers in their investment capital projects (Keown & et. al., 2003). In this regard, investment plays pervasive roles in response with the value of plants, buildings along with machineries and equipment that are procured by the organisations to increase operational, production and financial efficiency. From the perspective of manufacturing firms, investment is usually determined by the expected or stipulated financial benefits and funds both in the context of availability of capital and costs, including direct expenses, and interest rates among others (Bullen, 2007). In this paper, the discussion part emphasises on critically evaluating and justifying appropriate investment required in one of the projects for LCJ Ltd. The evaluation of the investment decisions required for the company was made in accordance with the results calculated from Payback period, Average Rate of Return (ARR) and Net Present Value (NPV) of the financial performance in each of the company’s projects i.e. Project A and Project B. In the context of justifying the recommended investment options, the discussion also undertakes critical assessment of each project along with their pervasiveness on the long-term sustainability of the company. The reasons justified to recommend the investment strategy in the project was also carried out by critically examining both financial and the non-financial dimensions associated with both the projects of LCJ Ltd in the context of internal and external benefits of the selected project for the company. Additionally, the discussion also provides a set of strong ethical code of conducts while justifying appropriate reasons of investments in the specific project of the company. The assessment of the ethical code of conducts is generally performed by drawing upon relevant research. Finally, the discussion section of the study clearly examines an appropriate and relevant HR functional model and describes its implications in light with the chosen capital investment project for LCJ Ltd. In this regard, the research work has been conducted by exploring trading relation of the organisation with Co-Share and appropriate and relevant research works (Khan & Chahar, 2010). Critical Evaluation and Justification of the Project Recommended for Investment The capital investment decisions over any project are generally governed through the process of determining the strength of the capital structure of the organisation while seeking capital investments (Fakhfakh, Zouari and Rim, 2012). In this context, firms are more likely to decide and identify about an appropriate investment portfolio on the basis of identifying possible return as well as value that the company can earn from its specific capital investment decision on a particular project (Palanivelu, 2013). According to the scenario observed in the current business structure of LCJ Ltd., it has been critically identified that a capital investment decision would play a pivotal role for the company to maintain its long-term sustainability in the packaging and distribution business market (Bullen & Eyler, 2009). However, in order to gain adequate potential from the capital investment decisions, the company would highly require focusing on factors associated with its internal and external business environment. In the context of external environment, an adequate focus on the economic performance of the particular market or nation as it has major bearing on the organisations to achieve desired financial goals. The increasing volatility in the legal factors such as changing tariff plans and/or rapid changes in tax and interest rate related policies can be substantially reduce the capability for LCJ after the selection of the project. In addition, major shifting of technological equipment can also be taken into account while selecting any particular project. In relation to the internal context, the factors such as corporate culture, governing system and controlling processes of the company can also be regarded as few major aspect for LCJ while adopting any of the particular projects. In this context, the corporate culture should highly emphasise adequate alignment with the administrative and operational functions of the organisation by maintaining shared goals and communication process while coordinating activities associated with the project. Nevertheless, strong focus on maintaining effective control of performance by each individual should also be a major activity for LCJ while executing any of the proposed projects in its manufacturing operations. Evaluating Scope and Future Role of the Projects in the organisations A critical assessment of the scopes and benefits to be attained from capital investment decision on a specific project is crucial for an organisation to determine future opportunities in order to build sustainable position in a competitive business market or industry (Maric, et al., 2011). The proposed assignment, both the projects involve wide range of beneficial aspects with strong financial return in the future business context. Project A: New Ticketing and Packing Machine With due regards to a brief background of both the projects, the decision of Project A, i.e., implanting new ticketing and packing machine is one of the major areas to be emphasised in the business. From general perspective, the project will increase efficiency of the packaging activities of the organisation by reducing a number of staff members by 12%, which can substantially help the organisation to reduce a large amount of cost (Kaplan Financial Limited, 2012). In addition, the project of deploying advanced packaging machine will also help the operational process of the organisation to maintain regulatory policies that are mandated by the food legislation committee. Nevertheless, the decision of deploying advanced machinery and equipment in the packaging operations will also increase the producing level of LCJ Ltd up to 18% than the current production capability. Therefore, the process would help the company to meet the expectation of its key client i.e. Co-Share by delivering products within a single day of operation (Cellini & Kee, 2010). Project B: New Computerised Quality Checking System On the other hand, project B is also identified as a major decision of implanting computerised quality checking system. Embracing of project B in the organisation will help LCJ to foster the capability of its warehouses to streamline quality of products to be delivered to its clients. The deployment of new quality checking system will also enable the firm to reduce the required number of workforce with an approximate rate of 18%. A significant saving of warehouse related costs will further enable LCJ to obtain its annual financial goals (Cellini & Kee, 2010; Fiksel & et. al., 1999). Moreover, it would substantially help the company to deliver quality based products to Co-Share and build strong relationship with the client. The implantation of project B has also been identified to increase the firm’s annual productivity level. The production level has been estimated to increase up to 17% with the help of implanting the new computerised quality checking system in its warehouse operations. Brief Analysis of the Chosen Project with Relevant Justifications With due regards to a brief analysis of the proposed projects i.e. project A and project B, it is quite evident that both the projects are designed in light of substantial scopes and benefits. The projects have been designed with the aim of increasing both productivity and minimising costs associated with operations in the firm as well (Fiksel & et. al., 1999). According to the projects proposed for LCJ, a critical evaluation in the context of analysing costs and benefits of both the project has provided a major insight in terms of selecting the most appropriate project suitable for investment for the firm. Financial Evaluation of the Proposed Projects According to the net cash flow assessment of project A (refer to Appendix), the annual cash flow assessment represents that the firm will be capable of covering the investment amount, i.e. 35,000 during the third year of implantation in the firm’s production level. The payback calculation has also resulted 3.31 years, which can be a major risk for the LCJ to obtain its desired commercial goals. In the context of project B, the payback period calculated on the basis of annual cash flow has been identified as 2.91 years, which is significantly lower than the payback period of the project A. According to a critical evaluation of the annual cash flow data of the project, it has also been identified that LCJ will be able to cover its capital investment during the 2nd year of its operation, which will further help the firm to earn a considerable amount of financial returns for long-run (Piana, 2001). Therefore, with due consideration to the payback period, the selection of project B would be more beneficial for LCJ to accumulate its desired financial goals. Corresponding to the annual payback period, the Average rate of return (ARR) (refer to Appendix) can also be regarded as a major example behind the selection of the project for the firm. In relation to results perceived from the ARR value, implantation of new quality checking machine is identified to be 64.29%. Although the ARR value in project B considerably lesser than project A, the financial return to be attained from deploying new quality checking machine will enable the firm to experience long-term benefits. This is owing to the fact that the implantation of quality improving machine will help the organisation to recover its fund earlier than its investment made with the aim of implanting new ticketing and packing machine in the firm. Additionally, the lower value in its payback period can also be considered as a major factor, which will help the LCJ to gain long-term benefit (Atrill and McLaney, 2011). Correspondingly, the deployment of project B by mean of implanting quality checking machine will enable LCJ to build a strong relationship with Co-Share. As per a brief observation of the current business operation, Co-Share is one of the major clients and its utmost essential for the LCJ to maintain long-term relationship with the company. The deployment of project B would substantially enable LCJ to consistently deliver quality based products to Co-Share and meet its expectations towards the firm. A consistent delivery of quality goods would help the firm to build a long-term relationship with Co-Share, which will further help the company to attain its strong sustainable position (Khan & Chahar, 2010). From the review of the financial results attained, it has also been identified that NPV of both the project also represents dissimilar results. According to the assessment result, it can be stated that, NPV in the context of Project A is considerably higher than the project B. The result represents that NPV in project A is £32910.59, which is significantly higher than the project B, i.e. £31443.87. With regard to the annual NPV rate of both the projects, the implementation of project A will be more beneficial for LCJ to gain major benefit in the market. However, the firm due to higher payback period of the project will not attain the benefit comprehensively. Correspondingly, the deployment of project B can provide higher financial return due to lower payback period than project A. Therefore, it can be stated from the critical assessment of both the project that project B would be more beneficial for LCJ to obtain long-term benefit than project A. The implementation of the project will provide a major opportunity to the firm to increase productivity level. Additionally, the deployment of quality checking machine will also help the firm to build long-term strong relationship with client. The implementation of the project will enable LCJ to satisfy the needs and expectations of its client by delivering streamlined products, which is more essential for any organization to sustain long-term in the competitive business environment (Atrill and McLaney, 2011). Critical Evaluation of the relevant theories associated with the Chosen Project Rationalist Theoretical Approach a. Utilitarian Theory: The theory(s) of utilitarianism provides the concept of exploiting the ultimate happiness along with minimizing the human sufferings, which might rise from different consequences from their actions. In relation to the present day context, the theory of utilitarianism has been identified as a major subject area in the present normative ethics subject area (Mill, 1863). Therefore, in order to adopt an appropriate project, the organisation, i.e. LCJ should emphasise on examining the skills and capabilities required by staff members in respond to each activity goal of the selected project. In this regard, the selection of project in accordance with the resource and capability of the organisation will help LCJ to increase employee job satisfaction, which is relatively a key factor for its long-term sustainability. b. Deontological Ethics The deontological approach involves an effective and regular practice of morality or a moral rule that to be followed by an individual in his/her various steps (Staveren, 2007). The approach is concerning universal standards that involve the ethical guideline that an individual must need to follow. In relation to the case of LCJ, an adequate focus on justifying activities associated with the project activities would be a major practice for the company while selecting any of the projects (Meyer, n.d.). The process would help the company to maintain ethical standards and values while performing with its newly selected project. Non-Rationalist Theory a. Intuitionism The theory of intuitionism generally terms as a mathematical philosophy based on relevant and justifiable ideas and assumptions (Detlefsen, 1990). In relation to the case of LCJ, an evaluation of intuitionism concepts examining the intuitive awareness regarding its value and knowledge regarding evaluative facts would also help the company to increase efficiency of its chosen capital investment project and trading performance with Co-share. The financial assessment conducted for both the project A and B reflected on the fact that the results perceived from payback period, NPV, and ARR value has provided major evidence regarding the actual benefits that can experience by LCJ in its future business operations. Moreover, the financial analysis conducted for both the projects was also to maintain a strong principle of avoiding any personal or institutional interests and are highly determined to sidestep their personal characteristics and sentiments. The justifications made in terms of selecting the particular project are considered in accordance with their validity and credibility that can substantially improve the business performance of LCJ. The accounting results perceived from different calculations of both the projects have been obtained number of relevant data and information significantly provides long-term opportunity for any organisation. With regard to the current business performance of LCJ, a greater focus on streamlining quality of its warehouse operating functions which can enable the firm to meet the expectation of its clients in the market (Raghunandan & et. al., 2012). Correspondingly, the positive value of NPV can also be a major factor behind the selection of project B for LCJ. Although the NPV results perceived from the calculation also resulted in a positive value of project A, the rapid growth in the cash flow from the initial year of project B has been considered as the most beneficial factor for the firm (Sookram & Kistow, 2012). In the context of results derived from the NPV calculation, an increase in the cash flow perceived by project A has been identified from the third year of implanting ticketing and packing machine in the production level of the firm. However, in the context of project B the deployment of new computerised quality checking system has obtained major growth in its cash flow from the first year in the warehouse operations. Therefore, the suggestions of developing capital budgeting for project B would be more beneficial for LCJ than project A in its operational process. A clear justification of the accounting results from the ARR values can also be regarded as a valid process of selecting the project for the firm. Correspondingly, the results obtained from ARR assessment have been perceived on the basis of traditional and widely accepted formula, which can also be regarded as a major valid process to defend the justification of the selected project. According to the results, the ARR value to be gained from the project B clearly represents a positive rate, which can also provide a major support to LCJ for performing long-term growth. Critical Evaluation of Human Resource Function Model There are various types of HR functional models can be ascertain in relation to the scenario of LCJ while selecting and appropriately executing one of its proposed projects (Azmi, 2008). In relation to the proposed case of LCJ, the selection of Ulrich and Brockbank’s updated HR functional model that would be more relevant for the company to clearly identify its implications in light with the chosen capital investment project and trading with Co-share, Implication of Ulrich and Brockbank’s Updated Strategic HR Function Model Fig: Ulrich and Brockbank’s Updated Strategic HR Function Model (Source: Truss & et. al. 2012) According to the updated HR functional model of Ulrich and Brockbank (2005), a core HR functional model includes five key roles that have major implication on the organisations to successfully plan and execute different HRM functions. In relation to the case of LCJ, a. Strategic Partner: According to the updated HR functional model of Ulrich and Brockbank, the strategic partner of the model generally refer to a process of collaborating leaders with other associated members including managers and executives. In relation to a successful implementation of the model, the HRM director of LCJ would be able to build strong partnership with different internal and external key members such as managers, supervisors, production staff members and clients as well. The process would help the chosen project to successfully reach its key goals and provide a major support to the leaders and managers to adapt change successfully. b. Functional Expert: The fuynctional expert of the HRM model of Ulrich and Brockbank signifies a process of knowing and successfully implementing HR functional knowledge. Process of knowing and successfully implementing of knowledge would further be an effective practice for the chosen project in LCJ to improve performance of its range of operational and managerial activities. The process would further help the managers and supervisors to improve quality of each associated members of the project and help to reduce possible errors. In this regard, the managers would also obtain performing training analysis tools in order to identify uindividuals required training and development sessions. In addition, managing costs along with time allocated to each project activity would also be a major advantage by implementing the HR function model developed by Ulrich and Brockbank. c. Employee Advocate The implementation of the proposed HR functional model would also help LCJ to successfully execute and obtain goals of activities asociated with the chosen project. The process would enable the HRM executives or managers to address issues associated with employee relations along with communicating with each individual staff member on behalf of the allocated supervisors or line managers of the project. Furthermore, the advocacy role of the managers will further involve improving operational activities in terms of effectively taking care of each individual staff member and build their strong association with the goals and aim of the chosen project for the organisation. d. Human Capital Developer: The factor includes an effective set of practices that encourage employees to obtain major opportunities by matching their skills and competencies. In this regard, the managers associated with the chosen project would be able to manage and foster operational and managerial roles of the workforce of the proposed project for their future professional goals. The adequate guidance of furnishing knowledge and ability would help LCJ to increase opportunioty for each indual staff member associated with the proposed project. e. HR Leader: The final factor of the Ulrich and BrockBank’s HR functional model includes a notion of valuing and leading the HR functions of LCJ and helping the managers to successfully implement best HR initiatives in the chosen project. The stage would further help the HR managers to promote the governance practice of LCJ by improving its reporting and representing performance records to the valuable stakeholder groups. This will help the chosen project to build a strong conscience of the values and performance of LCJ in its respective buysiness industry. Conclusion The aim of capital budgeting is to make an appropriate decision by selecting relevant projects that can help organisations to increase business efficiency for long-run. With due regard to the discussion made in this essay, it can be stated that both the projects A and B are designed with the benefits of increasing production capability and focused on minimising costs. In this regard, a critical evaluation of the significance and efficiency of both the projects, it has been determined that project B would be more beneficial for LCJ to sustain its long-term business efficiency. Project B significantly focused on increasing operational efficiency in LCJ through the deployment of computerised quality checking system. The shortest payback period as compare to project A, will enable the LCJ to obtain long-term benefits in packaging and delivering of fruits and vegetables to its clients. The optimisation of new computerised quality checking process will substantially increase the sustainable position of the company as the process of maintaining long-term quality management will help LCJ to meet the expectations of its client. With due regards to the HRM function model evaluated in the study, the implementation of Ulrich and Brockbank would substantially improve the functional role of the chosen capital investment project. According to a clear identification regarding the implication of each dimension, it can be stated that a successful execution of the model would not only help the organisation not only to eradicate managerial issues but also to achieve major and competitive advantages in its respective business domain. Recommendations Making strong and relatively effective decisions regarding the capital investment budget has long been observed as a major strategic part for the organisations to sustain in the current business industries. The accounting and financial calculations developed in this study has provided insight for full support towards easily identifying and determining key benefits of the projects for LCJ. In order to optimise the computerised quality checking system successfully, the LCJ should also need to focus on few other key areas prior to formulating its capital investment decisions. In relation to the HRM functional model selected for the chosen project, the organisation should highly focus on clearly structuring its different HR functions related to the dimensions described in the Ulrich and Brockbank model. An effective structuring process of the functions would help the managers to achieve desired outcome to be perceived from each dimension of the model. Additionally, the HRM managers in LCJ should also focus on planning a clear and easily understandable practice guideline in order to successfully implement and attain the goal of the proposed HR functional model in its chosen capital investment project. At the early stage of decision making process, an effective development and intervention plan through Profitability Analysis of the project could also help LCJ to effectively determine the appropriate project for its organisation. Additionally, evaluation of Internal Rate of Return (IRR) can also be recommended to LCJ prior to make the decision of selecting project for its long-term sustainability. More significantly, identifying possible risks associated with each of the projects could also improve the selection process of projects for the organisation. A critical assessment of the possible flaws along with risks associated with the project can enable LCJ to minimise constraint in its long-term business activities. Moreover, identifying future challenges associated with the ethical practices linked with the project could also be a major part for the firm to avoid any type of possible risks in its long-term business practices. References Azmi, F. T., 2008. From Picnic Organizers to Strategists: Turn of the Wheel for Human Resource Managers. Eurasian Journal of Business and Economics, Vol. 1, No. 1, pp. 37-60. Bullen, M. L. & Eyler, K. A., 2009. Human Resource Accounting and International Developments: Implications for Measurement of Human Capital. Journal of International Business and Cultural Studies, pp. 1-15. Bullen, M. L., 2007. Incorporating Human Resource Accounting Value Measures in Capital Investment Decisions. The Capital Budgeting Process. [Online] Available at: http://www.sedsi.org/2008_Conference/proc/proc/p071010004.pdf [Accessed April 11, 2015]. Cellini, S. R. & Kee, J. E., 2010. Cost - Effectiveness and Cost - Benefit Analysis. Chapter Twenty One. [Online] Available at: http://home.gwu.edu/~scellini/CelliniKee21.pdf [Accessed April 11, 2015]. Carritt, E. F., No Date. Criticism of Utilitarianism. The Theory of Morals: An Introduction to Ethical Philosophy, pp. 477-478. DesJardins, J.R., 2005. Doingwell By Doing Good. Distinguishing The Right From The Good In Theories Of Corporate Social Responsibility. [Online] Available at: http://www.stthomas.edu/cathstudies/cst/conferences/thegoodcompany/finalpapers/desjardins%20final%20pap.pdf [Accessed, April 29, 2015]. Detlefsen, M., 1990. Brouwerian Intuitionism. Mind, New Series, Vol. 99, No. 396, pp. 501-534. Fiksel, J. & et. al., 1999. Measuring Progress towards Sustainability Principles, Process, and Best Practices. Greening of Industry Network Conference Best Practice Proceedings, pp. 1-36. Kaplan Financial Limited, 2012. Investment Appraisal Techniques. Management Information. [Online] Available at: http://financial.kaplan.co.uk/Documents/ICAEW/MI_Ch3_p.pdf [Accessed April 11, 2015]. Keown, A. K. & et. al., 2003. Foundations of Finance: The Logic and Practice of Financial Management. Tsinghua University Press. Khan, S. & Chahar, B., 2010. Future of HR management in Indian scenario: Issues & Challenges. Asian Journal of Management Research, pp. 40-48. Meyer, M., No Date. The National HR Competency Model (Part III): Ten Competencies to Elevate HR from the HR room to the Boardroom. SA Board for People Practices. [Online] Available at: http://www.sabpp.co.za/siteitems/uploads/2013/02/HR%20Competencies%20Final.pdf [Accessed April 11, 2015]. Mill, J. S., (1863). What Utilitarianism Is. Utilitarianism, pp. 181-209. Ofori, D. F. & et. al., 2012. Perceptions of the Human Resource Management Function Among Professionals: A Ghanaian Study. International Journal of Business and Management, Vol. 7, No. 5, pp. 159-178. Palanivelu, V. R., 2013. Accounting for Management – Third Edition. Laxmi Publication. Piana, V., 2001. Investment. Economic Web Institute. [Online] Available at: http://www.economicswebinstitute.org/glossary/invest.htm#significance [Accessed April 11, 2015]. Raghunandan, M. & et. al., 2012. Examining the Behavioural Aspects of Budgeting with particular emphasis on Public Sector/Service Budgets. International Journal of Business and Social Science, Vol. 3, No. 14, pp. 110-117. Sookram, R. & Kistow, B., 2012. Capital Budgeting and Sustainable Enterprises: Ethical Implications. The Journal of Values-Based Leadership, Vol. 5, No. 1, pp. 1-7. Staveren, I. V. (2007). Beyond utilitarianism and deontology: Ethics in economics. Review of Political Economy 19(1), 21-35. Thukaram, R. M. E., 2007. Management Accounting. New Age International. Truss, C. & et. al. 2012. Strategic Human Resource Management. Oxford University Press. Williams, B., No Date. A Critique of Utilitarianism. Moral Doctrines and Moral Theories, pp. 123-129. Yusoff, Y. M. & at. Al., 2009. HR Roles Effectiveness and HR Contributions Effectiveness: Comparing Evidence from HR and Line Managers. International Journal of Business and Management, Vol. 4, No. 2, pp. 158-163. Bibliography Akerstrom, A., 2009. Corporate Governance and Social Responsibility: Johnson & Johnson. GRIN Verlag. Brunstein, I., 1995. Human Resource Management in Western Europe. Walter de Gruyter. David, J. L. & et. al., 2007. Professional Team Foundation Server. John Willey & Sons. Herrington, H. G., 2012. Resource Management Excellence: The Art of Excelling in Resource and Assets Management. Paton Professional. Leitner, S., 2012. Management Accounting. Economics and Mathematical Systems, Vol. 664, pp. 11-27. Morris, P. W. G. & Jamieson, A. (2005). Moving from corporate strategy to project strategy. Project Management Institute, Vo. 36, No. 4, pp. 5-18 Preez, N. D. & Louw, L., 2007. A Framework for Managing the Innovation Process. Innovation Process Models. Department of Industrial Engineering, South Africa, pp. 1-13. Schwalbe, K., 2008. Introduction to Project Management, Second Edition. Cengage Learning. Sims, R. R., 2007. Human Resource Management: Contemporary Issues, Challenges, and Opportunities. IAP. Tang, S. L. & et. al., 2003. Modern Construction Project Management, Second Edition: The Commercial Success and Political Controversies of Hong Kongs Railway. University Press. Wong, S. C. Y., 2008. Developing and Implementing Corporate Governance Codes. Global Corporate Governance Forum. [Online] Available at: http://www.ifc.org/wps/wcm/connect/4ad21b0048a7e717aa0fef6060ad5911/GCGF%2BPSO%2Bissue%2B10%2B12-8-08.pdf?MOD=AJPERES [Accessed April 11, 2015]. Westcott, R., 2005. Simplified Project Management for the Quality Professional: Managing Small and Medium-sized Projects. ASQ Quality Press. Appendix HRM in a Business Context Assignment – Reflective Statement Having completed the assignment, you are required to reflect upon the process you have been through and answer the following questions. This reflective statement will not be marked but needs to accompany your assignment. 1. I consider the strengths of this piece of work to be the financial data assessment process, which have provided an insightful support in terms of selecting appropriate project for the company, i.e. LCJ. Moreover, critical analysis of the justifications can also be considered as a major part that I have made in this essay. The justifications have provided me a major opportunity to preserve relevance, validity as well as reliability of the information and data that has been evaluated in the course of this study. 2. I consider the weaknesses of this piece of work to be the ethical consideration part, which has created major obstacle due to the unavailability of relevant data. Throughout the overall observation of the paper, I have been through few major suspicious facts about the major or key ethical practices that are essential to address in terms of determining appropriate project and making effective decision for capital investment budgeting in the organisations. 3. I think I could improve this piece of work by conducting in-depth analysis about the key factors linked with capital budgeting along with role of HR functions in the organisations, especially while selecting appropriate project for an organisation. In addition, I would also try to keep my major focus on different accounting and financial calculation works in terms of differentiating projects through different other dimensions such as long-term Profitability Analysis and Internal Rate of Return (IRR) among others. 4. I would like the assessors to comment specifically on the following aspects of this piece of work 1. Maintaining relevant justification with appropriate examples of capital budgeting decision making processes 2. Critically elaborating possible challenges prevalent to the selected project in the organisation, i.e. LCJ 3. Providing appropriate examples and relevant ideas to recommend best practice in capital budgeting decision making processes Calculations Payback Period Project A Year Net Cash Flow £ Cumulative cash flows £ 0 -35000 -35000 1 8000 -27000 2 18000 -9000 3 29500 20500 4 40000 60500 Therefore, payback period is 3 years + (9000/29500) = 3.31 years Project B 　 Net Cash Flow £ Cumulative cash flows £ 0 -35000 -35000 1 15000 -20000 2 22000 2000 3 24000 26000 4 29000 55000 Therefore, payback period is 2 years + (20000/22000) = 2.91 years Average rate of return (ARR) Project A: £(8000 + 18000 + 29500 +40000)/4 = £23875 ARR of Project A = (£23875/£35000)*100% = 68.21% Project B: £(15000 + 22000 + 24000 + 29000)/4 = £ 22500 ARR of Project B = (£22500/£35000)*100% = 64.29% Net present value (NPV) Project A Year Net Cash Flow £ Discount factor 12% Cumulative cash flows £ 0 -35000 1 -35000 1 8000 0.89285714 7142.86 2 18000 0.79719388 14349.49 3 29500 0.71178025 20997.52 4 40000 0.63551808 25420.72 NPV 32910.59 Project B 　 Net Cash Flow £ Discount factor 12% Cumulative cash flows £ 0 -35000 1 -35000 1 15000 0.89285714 13392.86 2 22000 0.79719388 17538.27 3 24000 0.71178025 17082.73 4 29000 0.63551808 18430.02 NPV 31443.87 Read More