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.
Nobody downloaded yet

Financial Management assignment 2 - Essay Example

Comments (0) Cite this document
Summary to essay on topic "Financial Management assignment 2"
The quantitative results can be found in the Appendices section of this report. Based on the results using the Payback Period, Net Present Value and Internal Rate of Return, Paddle Your Own Canoe Plc should not consider undertaking the project. With the Payback Period method, the number of years to recover the initial costs of the project resulted beyond the life of the plant and machinery, which is only five years.
Download full paper
Polish This Essay
Financial Management assignment 2
Read TextPreview

Extract of essay "Financial Management assignment 2"

Download file "Financial Management assignment 2" to see previous pages... The company does not seem to be cash-rich as it currently has an overdraft facility. Although the company has been operating successfully, taking on the project will put the company in an unfavourable cash flow position.
The Internal Rate of Return in which the Net Present Value is zero is undefined as there is no discount rate that is small enough to make the Net Present Value zero.
Let us write or edit the essay on your topic "Financial Management assignment 2" with a personal 20% discount.. Try it now
The company has already incurred a considerable sum of GBP 750,000 on research and development of this new range. Perhaps, the company can consider alternative ways of manufacturing this product, such as outsourcing or negotiating for better material costs without compromising on its quality.
The initial research cost of the project has already been incurred by the company and is considered as sunk cost. This is because whether Paddle Your Own Canoe Plc takes up the project, or not, the initial research cost will still be considered as being spent. In analysing the cash flow that will be generated from the project, sunk costs must be ignored. As such, the treatment of the initial research cost is to exclude from the cash flow calculation.
Likewise, depreciation of the plant and machinery is not included in the calculation of the cash flow because this is a non cash flow item, while the investment appraisal focuses on cash flows. Depreciation is an accounting method of recognising the reduction of the company's fixed assets in its income statement over time and does not affect cash at all. Thus, this item has also been excluded.

The additional working capital that the company needs to invest in is meant for other purposes at the end of the project. In fact, this will only be released for use at the end of the project. Although the company has to commit to this much earlier, the item has also been excluded in the calculations. This is because the working capital is not related to the project and will not affect the investment at all. However, in the event that the working capital is sought for the purpose of the project, then this will have to be considered in determining the feasibility of the project.
Question 1c

The payback period calculation looks at the shortest number of years to recover the cost of the project. Although the calculation is easy to understand and simple, it still has its limitations. It ignores the benefits that occur after the payback period and more importantly, the method ignores the time value of money.

The Net Present Value is an indicator of how much value an investment or project adds to the company. The Net Present Value is a more reliable method of calculating the returns expected from investments as the method considers the time value of money. The Net Present Value compares the value of a dollar today to the value of that same dollar in the future, taking both inflation and returns into account. A positive Net Present Value generated from a prospective project is a good sign and should be accepted On the contrary, a negative Net Present Value resulting from projects should be rejected because the cash flows will also be negative.

The Internal Rate of Return is the discount rate that delivers a Net ...Download file "Financial Management assignment 2" to see next pagesRead More
Cite this document "Financial Management assignment 2"
  • APA
  • MLA
  • CHICAGO
(“Financial Management assignment 2 Essay Example | Topics and Well Written Essays - 3000 words”, n.d.)
Financial Management assignment 2 Essay Example | Topics and Well Written Essays - 3000 words. Retrieved from https://studentshare.org/miscellaneous/1507988-financial-management-assignment-2
(Financial Management Assignment 2 Essay Example | Topics and Well Written Essays - 3000 Words)
Financial Management Assignment 2 Essay Example | Topics and Well Written Essays - 3000 Words. https://studentshare.org/miscellaneous/1507988-financial-management-assignment-2.
“Financial Management Assignment 2 Essay Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.org/miscellaneous/1507988-financial-management-assignment-2.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC "Financial Management assignment 2"
Financial Information: Coursework Assignment
The company offers a huge range of products including food items, general merchandise, accessories, household items, and electrical products. In addition to its core business the company also provides financial services including insurance and retail banking.
5 Pages(1250 words)Essay
Financial Resources Management Assignment
The common room is to provide social work area for the students when they are not in class. This plan intends to redevelop the already existing vacant room in the university. This will make a better common room where student of Manchester University can spend their time and relax.
3 Pages(750 words)Essay
Financial Management Individual assignment
The choice of the mode will depend on the company’s fundamentals as well as the nature of ownership desired by it. These decisions are crucial and most of the big companies seek expert financial advice in such matters. This is mainly
12 Pages(3000 words)Essay
FINANCIAL MANAGEMENT Assignments1-3
According to a survey conducted on health care and healthcare policy, the absence of current financial interests and incentives of the heath care providers are affecting effective and integrated delivery model. In other words, the delivery of services by the
2 Pages(500 words)Essay
Financial Service Assignment 2
This particular market i.e. the derivatives market is believed to have witnessed the most rapid and increased development compared to the other divisions of the market in the recent years. The derivatives division has turned out to be a
12 Pages(3000 words)Essay
Children oncentration
Difficulty listening in class and lack of concentration is thought to be that the children not trying hard enough to pay attention, they have a bad attitude towards studies and should be accountable to their actions as well as pushing them harder not knowing that this children do not know how to pay attention.
2 Pages(500 words)Essay
Financial Management Assignment
The deal is historically the third largest corporate deal that will end very controversial 14 years venture between the two groups (Business Today, 2013). In 1999, Vodafone entered the US market through a series of mergers and acquisitions that
5 Pages(1250 words)Essay
Week 2 Assignment: Mini-case Global Financial Management:
In addition the negative net cash flows from operations is negative due to the increases in the working capital. Moreover, the firm borrowed heavily and it used $711950 on the Fixed Assets. The firm also sold
1 Pages(250 words)Essay
Management, Leadership and Change assignment 2
The research concentrated on transformational leadership that enabled Nokia Corporation to remain a market leader for decades. The focal aim of the study was judging if transformational
12 Pages(3000 words)Essay
Strategic Financial Management 2
It further plans to use of 100% debt financing for the project. This paper will attempt to help Rattle Co in making a decision by answering at least four
12 Pages(3000 words)Coursework
Let us find you another Essay on topic Financial Management assignment 2 for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us