As a consultant, compile an individual executive summary report providing guidance to the board of Hope Electronics Ltd. on the following:

1. Decide whether to proceed with the project using the payback period appraisal method, considering Hope's short-term liquidity issues. (Disregard tax and inflation.) Offer insights into the strengths and weaknesses of the appraisal technique applied to evaluate the microwave tumble drier project.

2. Determine whether to proceed with the project using the Net Present Value appraisal method. (Disregard tax and inflation.) Include advice on the strengths and weaknesses of the appraisal technique utilized in the assessment of the microwave tumble drier project.

3. As the microwave drier uses new technology this is a relatively high risk project. Explain how this risk might be reflected in the project appraisal, and how your advice may be amended as a result of appropriate consideration of the specific risks of this project.

Case study -

BACKGROUND

Hope Electronics Ltd is an established company which has continued to be profitable in recent years despite operating at below full capacity. Continued investment in research and development has produced a new innovative product, the microwave drier, which is able to dry most garments at considerably lower cost than conventional tumble driers. Market research supports the proposed price of 400 per drier with the following predicted sales over the next five years:

Year Unit Sales 12345 20,000 30,000 35,000 42,000 40,000