UNIT 6: Capital Investment Appraisal

Investment appraisal is the planning process used to determine whether an organization's long-term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.

Task: You have been employed by a company to provide consultancy services for a new project opportunity. Below is a summary of projected net cashflows for two (2) projects the company is considering investing in. Utilize capital investment appraisal techniques to determine which project should be pursued for the selected period.

	Predicted Cash Flows
Years	Machine A: The Mega Star2022 $USD	Machine B: Turbo Mac2022 $USD
0	($25 million)	($20 million)
1	1,000,000	2,000,000
2	5,000,000	10,000,000
3	6,000,000	15,000,000
4	10,000,000	8,000,000
5	7,000,000	6,000,000
6	2,000,000	5,000,000
7	1,000,000	4,000,000
8	500,000	900,000
9	500,000	700,000
10	400,000	500,000

Guiding topics of focus :

1. Provide a summary of the companys background and products selected.
2. Illustrate the capital investment techniques to be used to assess the projects.
3. Based on the results achieved from the investment techniques used make recommendations with justifications for your choice.

Required

1. Illustrate any four capital investment appraisal techniques to determine which Machine should be pursued for the selected period based on the initial cost of $25 million and $20 million respectively, and a cost of capital of 10%.
2. Prepare a written report and PowerPoint presentation to the CEO of the company on the projects being considered.
3. Make recommendations for your choice and give your rationale.

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