Capital Investment Decisions Assignment Help Investment Guidelines for Evaluating Planned Projects
Project evaluation is a methodology for assessing the economic, social, environmental and financial impact of proposed capital projects. In order to evaluate planned projects in terms of financial performance, the organizations should
valued possible costs and benefits in terms of monitory (Haezendonck, 2007). On the other hand our business accounting decisions experts said that in the planned project, budget analysis should provide decision-makers with information on cash flows, borrowings, funding sources, etc. in order to assess the budgetary implications of the project (Alexander, 2006). At the same time our budget analysis of case study assignment experts says that all the planned projects should include fixed capital expenditure, plant and equipment, and capital grants and subsidies. In addition to this, a planned project should also improve value for money and the cost of project. Key clients and stakeholders should be consulted on a periodic basis to ensure the evaluations are relevant to client needs and to avoid unnecessary costs and delays (Haezendonck, 2007).
Guidelines for the Evaluation Tools NPV: Under this method, the main guideline to evaluate a project is to accept a project when NPV is higher than the zero or reject the project if NPV is less than zero. Along with this, in this method, it is necessary to discount all cash flow properly to identify the NPV of the project. By accepting positive NPV projects, company can enhance the benefits to the shareholders (Bagad, 2008).
IRR: As per this method, business organization should accept the project, if IRR is greater than the discount rate of the project. On the other hand, a company should reject the project, if IRR is less than the discount rate. For example, a project discount rate is 12% and its IRR is 15%, then project should be accepted as the IRR of the project is greater than the discount rate.
MIRR: According to this method, major guidelines in order to evaluate a project are accepted when MIRR is higher than or equal to required rate of return. In contrast, a project should be rejected, if the MIRR is less than the required rate of return (Benninga, 2000).
Payback: In this method, company should accept a project in which the payback period is less than the whole life of the project (Albrecht, James & Swain, 2010). For example, a company has a project with life of 4 year, and it should accept the project when the payback period is less than 4 year.
Breakeven Analysis: In order to find or evaluate the break-even point, the user should estimate the sales revenues. It means organizations should make best estimation regarding what sales revenue will be for an entire year. In addition to this, company should also calculate unit contribution margin and their ratio for product categories. At the same time, annual contribution margin by category should also be calculated by multiplying sales revenue with the contribution margin ratio. After this, contribution margin ratio for the entire enterprises and fixed cost should be evaluated (Kuratko, 2008).
Appropriate Methods for Comparing Projects of Different Sizes In today’s challenging business environment, there are several methods that are used by the companies for comparing the projects of different size. Accounting rate of return, payback period, net present value (NPV), profitability index, internal rate of return (IRR) and modified internal rate of return (MIRR) are some example of methods of capital budgeting for comparing projects of different size (Bagad, 2008). But, both, NPV and MIRR are most appropriate methods as compared to other methods. For example, through the NVP method, a company can appraise long term project effectively. In addition to this assignment help, this method also measures the excess or shortfall of cash flows for an organization that is beneficial for the companies in the comparison of project of different size. At the same time, NPV eliminates the time element in comparing alternative investments. In this way, it provides better decisions than other methods (Albrecht, James & Swain, 2010). On the other hand, MIRR is another much important method of capital budgeting for comparing projects of different size, because it is a better and improved method for project evaluation. Additionally, MIRR method correctly assumes reinvestment at project’s cost of capital and avoids the problem of multiple IRRs (Benninga, 2000). References Albrecht, W.S., James. E.K., & Swain, S.M. (2010). Accounting: Concepts and Applications. USA: Cengage Learning. Alexander, E.R. (2006). Evaluation in Planning: Evolution and Prospects. UK: Ashgate Publishing, Ltd. Bagad, V.S. (2008). Managerial Economics and Financial Analysis. USA: Technical Publications. Benninga, S. (2000). Financial Modeling. USA: MIT Press. Haezendonck, E. (2007). Transport Project Evaluation: Extending the Social Cost-Benefit Approach. UK: Edward Elgar Publishing. Kuratko, D.F. (2008). Entrepreneurship: Theory, Process, Practice. USA: Cengage Learning. Assignmenthelpexperts com is the most popular website for solving accountig case study paper assignment help and business accounting assignment help. We have wide experience of writing assignment on case study that makes us perfect for solving assignment.