Constant Growth And Development assignment [5]
论文作者:英语论文论文属性:议论文 Argument Essay登出时间:2015-08-31编辑:Karlie点击率:15522
论文字数:3250论文编号:org201507291818373955语种:英语 English地区:加拿大价格:免费论文
关键词:Financial managementproject appraisalManagement accounting
摘要:本论文主要阐述了可持续发展的重要性,在现代化和商业活动的影响下,全球环境已经遭受到不同程度的破坏,因此我们必须重视环境问题,把可持续发展作为首要目标。
CUSSIONS AND CONCLUSION 建议/讨论和结论
The rate of interest at which the investment cost leads to investment benefit is known as the IRR. This means that, all investment gains are with the time value for money and at the interest rate, the investment has a zero NPV (ACCA, 2008). This investment appraisal has demonstrated the use of IRR to value the cash flow and raise it as a consequence of the investment while determining it with inflation (ACCA, 2008). For example, a higher target rate of return was chosen, so that even in a situation where the inflation rate rises the company will still save cost. Interest rate may rise to 15% during the life time of the project due to the increasing inflation rate in Nigeria, as history has shown that Nigerian base rate rises up to 0.45 every year. Therefore, risk is incorporated and the project is considered less risky. The IRR is 20.7%, this has shown a very good risk margin considering the Nigerian economic instability. Furthermore, the advantage of the IRR being 20.7% is that, even if the interest rate increases the project will still be economically good.
Base rate of the Central Bank of Nigeria was used to determine the cost of capital and calculate the initial NPV. The base rate was also used to incorporate inflation by discounting cash flows to get the future value. Inflation changes value for money, this is the main reason for using the base rate in determining the discount factor for the NPV calculation. Two discount rates were used to solve the equation of IRR which assumes that NPV changes with discount rate but this is not the case in reality. The positive result of the NPV means that the project should be accepted and the chosen discount rate of 15% helped identify the actual value of the savings to be made, based on the fact that the project is anticipated to make an overall savings. However, the actual value of IRR is more important as it considers the current economic climate and the future interest rate of Nigeria. The result has shown that the IRR is higher than the target rate of return. It is important to note that, base rate is used to determine NPV not IRR while IRR assumes that NPV is zero.
The savings to be realised by PPMC as a result of the new initiative as well as the indication of an attractive Payback period upon investment is clearly exposed. Payback period 2 years 6 months is a good payback period since, the criteria requires payback of the initial investment in 5yrs. Hence, it would have been a bad payback period if it exceeds 5years. Furthermore, PBP was used to support other data because it is not enough to serve as criteria for investment. The company will continue to benefit from the project for years even after returning the initial investment. PPMC could consider using a different discount rate for this project since it is aimed at executing an environmental project and not profit making. This appraisal has been thoroughly evaluated and has proven that the investment is reasonable (Mclaney, 1994). Since, the company will spend only N65, 880,000 more on the annual maintenance cost (52, 920,000) and save N52, 920,000 in the first year and more in the subsequent years at the same time stopping the carbon emissions from the old cars.
In addition, it is a mandatory for the company to meet up the government's requirement to reduce environmental impact and comply with the prevailing legislation. If the
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