ll demonstrate the company's commitment towards the reduction of Co2 emission thereby protecting the environment. The company will also be recognised as the first to introduce zero emission cars to Nigeria and it will serve as a solution that could bring cost savings.
Since the vehicle also comes with a free maintenance package including running cost for 3years 6months in form of a guarantee, as it is a newly introduced vehicle. Honda Company is trying to advertise this environmentally friendly vehicle to the world and attracting customers by covering maintenance and running cost. This is better compared to the guarantee of the old vehicles which is only 1 year. N52, 920,000 will be saved in the first year, while in the subsequent years N1 per litre will be added due to the projected annual oil product price increment. Therefore the total cost of investment will save the annual cost of fuel and maintenance. It is important to note that N65 is the current price of the petrol in Nigeria.
Investment appraisal is a technique used by managers to achieve their target. It is the duty of the manager to determine and prove the importance of the project (Akalu, 2001; Mulholland et al., 2003). Therefore, it is important in the planning of this particular environmental project.
PAYBACK PERIOD 投资回收期
The duration of time for the PPMC to gain its initiated investment of N118, 800,000 on implementation is known as the payback period (Layard & Glaister, 1994). The period of time that cash inflows will become the same with cash outflows is also known as the payback period (ACCA, 2008). However, it does not consider time value for money which expresses that, amount saved today is much more valuable than the same amount saved in 2 years. This is considered as one of the greatest setback (Dury, 1997).
In order to calculate the payback period with precision and accuracy, the year 3 savings should be broken down to monthly by dividing it by 12 and then the cumulative savings for year 1 and 2 should be subtracted from the initial investment. The result should then be divided by the monthly savings of year 3 to have the actual number of months (Mclaney, 1994). This is calculated below:
Savings per month for year 3 = N43, 416,000/12 = N3, 618,000
N118, 800,000 - N95, 688,000 = N23, 112,000/N3, 618,000 = 6.38
Approximately 6 months.
Payback period is 2years 6 months
NET PRESENT VALUE (NPV) 净现值(NPV)
NPV is realised by using a discount rate to determine the current value of future savings and subtracting the capital cost (Hannagan, 2008). This method accepts with projects that have positive NPV. The method also makes comparison between present value of cash outflows and inflows from an investment (ACCA, 2008).
The table below shows the number of years (4), future value (FV), cash flow, discount factor (DF) 15% and the present value (PV). The first step in calculating NPV is to multiply the cash inflow (savings) by the DF of each year to get the PV. Then, sum up the PV and deduct the initial investment from the total PV to arrive at the NPV (Mclaney, 1994). 15% DF was selected not to make profit but to avoid risk; it was selected after considering the current base rate of the Central Bank Nigeria which is 13.2% as the base rate keeps appreciating eve
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