Your line manager has been pleased with your
work to date and has invited you to a meeting with the Marketing Director. She has been researching a number of projects
to encourage customers to return to the store.
You have been asked to report on the financial viability of the projects.
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Get Help Now!The costs associated with each
project are as follows:
| Project 1 | Project 2 | Project 3 | Project 4 | |
| £ | £ | £ | £ | |
| Initial Cost | 550,000 | 550,000 | 290,000 | 460,000 |
| Expected Cash Flow | ||||
| Year 1 | 20,000 | 50,000 | 15,000 | 30,000 |
| Year 2 | 75,000 | 175,000 | 80,000 | 95,000 |
| Year 3 | 125,000 | 200,000 | 120,000 | 150,000 |
| Year 4 | 250,000 | 175,000 | 100,000 | 210,000 |
| Year 5 | 200,000 | 70,000 | 60,000 | 300,000 |
Table of
Discount Factors
| Rate percent | ||||||
| Year | 4.5 | 5.0 | 5.5 | 6.0 | ||
| 1 | 0.9569378 | 0.9523810 | 0.9478673 | 0.9433962 | ||
| 2 | 0.9157300 | 0.9070295 | 0.8984524 | 0.8899964 | ||
| 3 | 0.8762966 | 0.8638376 | 0.8516137 | 0.8396193 | ||
| 4 | 0.8385613 | 0.8227025 | 0.8072167 | 0.7920937 | ||
| 5 | 0.8024510 | 0.7835262 | 0.7651344 | 0.7472582 | ||
- Using appropriate project
appraisal techniques assess and demonstrate the financial viability of each
project.
- Evaluate the methods of
investment appraisal completed in part (a).
Recommend to the Marketing Director the most appropriate project for the
business.
- Explain appropriate
internal and external sources of finance that could be used to finance this
project.
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