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Write My Essay For Me- Topic: International Finance
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- Subject: Finance
- Number of Words: 2500
- Citation/Referencing Style: APA
FIN310 International Finance – Final Assignment
Investment Alternatives and Capital Budgeting
The expected cash flows of three investment projects — Project Alpha, Beta, Charlie and Delta — for the next ten years are provided in the table below; year 0 as an initial period and year 1 to year 10. Discount rate 12%.
Period | Project
Alpha (£) |
Project
Beta (£) |
Project
Charlie (£) |
Project
Delta (£) |
Year 0 | (5,000) | (5,000) | (5,000) | (5,000) |
Year 1 | 900 | 700 | 2,000 | 500 |
Year 2 | 900 | 800 | 2,000 | 0 |
Year 3 | 900 | 900 | 2,000 | 3,000 |
Year 4 | 900 | 1,000 | 1,000 | 0 |
Year 5 | 900 | 1,100 | 0 | 500 |
Year 6 | 900 | 1,200 | 0 | 2,000 |
Year 7 | 900 | 1,300 | 0 | 0 |
Year 8 | 900 | 1,400 | 0 | 1,000 |
Year 9 | 900 | 1,500 | 0 | 0 |
Year 10 | 900 | 1,600 | 0 | 0 |
As a professional accountant of Sage Accounting Ltd., you are required to provide critical advice to your client on the best investment decision — whether to invest in the project of Alpha, Beta, Charlie or Delta
In order to maximize the investment return to your client, you are required to employ five main investment appraisal techniques such as the techniques of PBP (Payback Period), NPV (Net Present Value), IRR (Internal Rate of Return) and a stability test.
With the prevailing interest rate in the lending and borrowing markets, as a professional accountant you consider that the opportunity cost of capital at present is … per cent. Please discuss the opportunity cost of capital.
Required Tasks
1. Calculate the Payback Period of each project. (5 marks)
2. Show the ranking of the projects by employing Payback Period and advise your client on the best investment action. (5 marks)
3. Calculate the ROCE of each project. (5 marks) (Return on Capital Employed)
4. Show the ranking of the projects by using ROCE criteria, and advise your client on the best investment action. (5 marks)
5. Calculate the NPV of each project. (5 marks)
6. Show the ranking of the projects by utilising NVP criteria, and advise your client on the best investment action. (5 marks)
7. Calculate the IRR (10 marks)
8. Show the ranking of the projects by using IRR and advise your client on the best investment action. (5 marks)
9. Critically comment on the stability (fluctuation) of all projects. (10 marks)
10. Show the overall rankings of all projects by each of the five criteria. (5 marks)
11. Critically discuss the main superiority (+) of the methods of capital budgeting decision (such as Payback Period, NPV, ROCE, IRR and Stability Test) as well as the main drawbacks (-). (25 marks)
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