Use 10 years as the project life, and forecast the exchange rate based on previous years average.

1: Briefly explain the investment appraisal techniques that an organization can use and apply the identified techniques to perform an investment appraisal for ABC Ltd in foreign markets (USA, France and Switzerland). Bear in mind that ABC is a clothing manufacturer operating in UK for the last 10 years. As part of its plan of expansion, ABC has decided to set up an operating unit in another country to produce clothing to be sold at the new market. The current interest rate is at 10%.

Notes Avg Spot Rate	YR1	YR 2	YR 3	YR 4	YR 5	YR 6
USD	2.10	2.20	2.30	2.10	2.25	2.50
Euro	1.80	1.90	2.00	2.10	1.95	1.90
Francs	10.0	12.0	14.00	12.00	13.00	14.00

Task

Evaluate the investment appraisal techniques that can be used by an organization to assess the extent to which a business plan can be considered a lucrative move. You need to then apply the relevant techniques to the following scenarios to conduct an investment appraisal for ABC LTD:

ABC is a clothing manufacturer operating in UK for the last 10 years. As part of its plan of expansion, ABC has decided to set up an operating unit in another country to produce clothing to be sold at the new market. The current interest rate is at 10%. The options available are:

USA

The estimated running expenses per annum were amounted to 210K. The expected revenue would amount to USD700K per annum. In addition, an approval fee of 22K has to be paid in advance for the company to be able to trade within the country on an annual basis.

France

It is expected that the running expenses would amount to 190K per annum and the annual turnover is expected to be EURO 450K. The organization will have to pay an approval fee of 25K in advance for the company to be able to trade within the country on an annual basis. In addition to this, the organization will also have to pay a one off Royalty Fee of 25K regardless of the number of operating years.

Switzerland

The estimated running expenses would amount to 200K per annum while the expected revenue would be Swiss Francs 3800K. The organization would have to pay a Licensing fee of 30K has to be paid each year. The government stipulated controls ensure that a routine inspection is conducted of the factory every three years and the cost per inspection would amount to 70K.

Identify and explain the sources of risks prone to the business, especially considering the international aspects of financial risk management, possible risk measurements and monitoring while taking action to mitigate them towards business success.

Year 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 10.990 0.80 0971 0.962 0.952 0.943 0835 0.926 0917 a909 0.901 0893 0885 0877 0.870 0862 0855 0.847 0.840 0.833 2 0.890 0.961 0943 0.925 0.907 0.890 0.873 0857 0842 0826 0.812 0.797 0.783 0769 0756 0.743 0731 0.718 0.706 0.694 3 0.971 0.942 0915 0.889 0.864 0.840 0816 0794 0.772 0751 0.731 0.712 0.693 0.675 0.658 0641 O0624 0.609 0.593 0.579 4 0.961 0.924 a888 0.865 0.823 0.782 0.763 O.735 0708 0683 0.66e 0.636 0.613 0.592 0.572 0.552 a534 0.516 0.499 0.482 5 0.951 0.906 0883 0.822 0.784 0.747 0.713 0.681 0650 0621 0.593 0.567 0.543 0.519 0497 0476 0456 0,437 0.419 0,402 6 0.942 0888 0837 0.790 0.746 0.705 0.666 0630 0.596 564 0.535 0.507 0480 0.456 432 0410 0390 0.370 0,352 0.335 7 0.933 0871 0,813 0.760 a711 0.665 0.623 0.583 0.547 a513 0.482 0,452 0,425 0.400 376 0.354 a333 0.314 0.296 0.279 8 0.923 .853 a739 0.731 0.677 0.627 0.502 0.540 0502 a467 0.434 0,404 0.376 0.351 .327 o3os a266 0.266 0.249 0.233 9 0.914 837 a766 0.703 0.645 0.582 0.544 0.500 OA60 a424 0.391 0.361 0333 0.308 O.284 263 a243 0.225 0.209 0.194 10 .005 0&20 a744 0.676 0.614 0.558 0.soe o.463 A22 a386 0.352 0.322 0.295 0.270 .247 0227 a208 0.191 0.176 0.162 11 O.896 0 4 a722 0.660 0.585 0.527 0.475 0.429 .388 a350 0.317 0.287 0.261 0.237 O.215 O.195 a178 0.162 0.148 0.135 12 0.887 0.789 a701 0.625 0.557 0.497 0.444 0.397 o.356 a319 0286 0.257 0.231 0.208 O.187 O.168 a152 0.137 0.124 0.112 13 0.879 0.773 0681 0.601 0.530 0469 0415 0368 0.326 0290 0258 0229 0.204 0.182 0.163 0.145 0130 0.116 0.104 0.093 14 0.870 0.758 0661 0.577 0.505 0.44 0.388 0340 0299 a253 0232 0205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 15 0.851 0.743 0642 0.555 0481 0417 032 0315 0275 0239 0209 0.183 0.160 0.140 0.123 0.108 0095 0.064 0.074 0.065 16 0.853 0.728 0623 0.534 0458 0.394 0339 0282 0252 0218 0.188 0.163 0.141 0.123 .107 0093 00e1 0.071 0.062 0.054 17 0.844 0.714 0606 0.513 0436 0.371 0317 0.270 0231 0198 0.170 0146 0.125 0.108 0.093 00e0 0069 0.060 0.052 0.045 18 0.896 0.700,587 0.494 O.416 0.350 0.296 0.250 o212 a180 0.153 0.130 0.111 0.095 0.081 0069 a059 0.061 0.044 0.038 19 0.828 0686 0570 0.475 0396 0331 0277 0.232 0194 0164 0.138 a116 0.098 0.083 0.070 0060 0051 0.043 0.037 0.031 20 0.820 0673 0554 0.456 0.377 0312 0.258 0.215 0178 0149 0.124 0.104 0087 0073 0.061 0051 0043 0.037 0.031 0.026