DAL Plc. Investment Appraisal
Assessment Information – What you need to do
This assignment is an individual assignment. The assessment will take place in week 15. The assessment will include materials covered in weeks 1-8.
This assignment requires you to analyse a case study. It includes deploying various investment techniques to analyse the viability of an investment and ad management on the most appropriate cause of action.
You have a 24-hour window in which to complete and submit your work
Criteria for Assessment - How you will be marked
A rubric/criterion by which the work will be assessed in your module handbook. This assignment is designed to assess the following learning outcomes:
1. Evaluate the various models and techniques used in corporate investment decisions
Assessment DetailsThe word count is maximum of 1,500.
There will be a penalty of a deduction of 10% of the mark for work exceeding the word limit by 10% or more.
The word limit includes tables, figures, quotations and citations, but excludes the references list and appendices.
NO SCREEN SHOTS, PHOTOS OR HAND-WRITTEN WORK WILL BE ACCEPTED
How to Submit your Assessment
• Your coursework will be given a zero mark if you do not submit a copy through Turnitin. Please take care to ensure that you have fully submitted your work. • Please ensure that you have submitted your work using the correct file format, unreadable files will receive a mark of zero. The Faculty accepts Microsoft Office and PDF documents, unless otherwise advised by the module leader.• All work submitted after the submission deadline without a valid and approved reason will be subject to the University regulations on late submissions.o If work submitted as a reassessment of a previously failed assessment task is submitted later than the deadline the work will immediately be given a mark of zero per cent• The University wants you to do your best. However, we know that sometimes events happen which mean that you can’t submit your coursework by the deadline – these events should be beyond your control and not easy to predict. You will find information about applying for extensions and deferrals here.• Students MUST keep a copy and/or an electronic file of their assignment.• Checks will be made on your work using anti-plagiarism software and approved plagiarism checking websites.
DAL Plc. Investment Appraisal Case Study
Student Name
University
Course
Professor Name
Date
DAL Plc. Investment Appraisal Case Study
1 The NPV
Project
Cost (in £)
Project duration (in years)
Annual cash inflow (in £)
PVF of 14%
Present values (PV) (in £)
Net Present values (NPV) (in £)
1
1,500,000
18
222,500
6.467
1,438,907.50
(61,092.50)
2
350,000
7
175,000
4.288
750,400
400,400
3
165,000
7
41,000
4.288
175,808
10,808
4
245,400
12
62,000
5.660
350,920
105,520
5
752,100
11
146,600
5.453
799,409.80
47,309.80
6
192,500
9
55,500
4.946
274,503
82,003
7
613,000
15
101,250
6.142
621,877.50
8,877.50
8
783,000
4
263,000
2.914
766,382
(16,618)
NB: Net Present values (NPV) = Present values (PV) – Cost
a) From the net present value calculations, projects 2, 3, 4, 5, 6, and 7 are acceptable because they have NPV values of more than 0. However, projects 1 and 8 are unacceptable because they have NPV values of less than 0.
b) The projects from the highest to the lowest values are as follows.
Project 2, project 4, project 6, project 5, project 3, project 7, project 8, and project 1
2 Profitability Index
Project
Cost (in £)
Project duration (in years)
Annual cash inflow (in £)
PVF of 14%
Present values (PV) (in £)
1
1,500,000
18
222,500
6.467
1,438,907.50
2
350,000
7
175,000
4.288
750,400
3
165,000
7
41,000
4.288
175,808
4
245,400
12
62,000
5.660
350,920
5
752,100
11
146,600
5.453
799,409.80
6
192,500
9
55,500
4.946
274,503
7
613,000
15
101,250
6.142
621,877.50
8
783,000
4
263,000
2.914
766,382
Profitability Index = present values of future cash flows /cost
* Profitability index for project 1 = £1,438,907.50/ £1,500,000 = 0.959
* Profitability index for project 2 = £750,400/ £350,000 = 2.144
* Profitability index for project 3 = £175,808/ £165,000 = 1.066
* Profitability index for project 4 = £350,920/ £245,400 = 1.430
* Profitability index for project 5 = £799,409.80/ £752,100 = 1.063
* Profitability index for project 6 = £274,503/ £192,500 = 1.426
* Profitability index for project 7 = £621,877.50/ £613,000 = 1.014
* Profitability index for project 8 = £766,382/ £783,000 = 0.979
* The Projects from the Most to the Least Preferred
The projects from the most to the least preferred are as follows.
Project 2, project 4, project 6, project 3, project 5, project 7, project 8, and project 1
* The PI Decision Rule and what a PI Ratio Tells Us about a Project
The PI decision rule is that a firm should accept projects that have profitability index of more than 1, reject those with profitability index of less than 1, and can either accept or reject projects that have profitability index of 1. The profitability index tells us about the possible profit or loss of the project that a firm proposes and whether to stop or continue with the project.
* The Projects that should be Financed with the £1,510,000 Budget
Based on the PI calculated in a), the projects that should be financed with the £1,510,000 budget are projects 2, 3, 4, 5, 6, and 7.
* The Overall NPV for the Selected Projects in Part c)
Project
Cost (in £)
Project duration (in years)
Annual cash inflow (in £)
PVF of 14%
Present values (PV) (in £)
Net Present values (NPV) (in £)
2
350,000
7
175,000
4.288
750,400
400,400
3
165,000
7
41,000
4.288
175,808
10,808
4
245,400
12
62,000
5.660
350,920
105,520
5
752,100
11
146,600
5.453
799,409.80
47,309.80
6
192,500
9
55,500
4.946
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