Financial Decision Making and Risk Coursework Example | Topics and Well Written Essays - 2000 words

Financial Decision Making and Risk - Coursework ExampleThe new assembly cell will contain three call programmer/operators who will be recruited at a salary of 20,000 per year each. The cell robots argon expected to last for 5 years, after which they can be sold off for an estimated price of 1,000 each. Your companys cost of capital is currently 10%.As the Financial Director of your company, you are required to submit a detailed report to the Managing Director and your fellow Board members evaluating the proposed investment, fully justifying any recommendation you will make and identifying any say-so problem areas and offering potential solutions.Investment appraisal is the process of assessing potential investment projects to see which wholenesss are most viable (and profitable) for the firm. (Samuels et al, 2000). This report is aimed at catch whether investing in the automated assembly cell will be beneficial for the company. To analyze the benefits of the investment a number o f different calculations including the payback menses and sensitivity analysis have been made. These have been included in the next few sections along with the investment decisions based on the calculations.Payback period is one of the simplest method actings of investment appraisal. This method is generally beneficial for short-term projects and for projects where the returns are fixed and accurate. The most beneficial feature of this method is that it takes into account the liquidity of the project, which is useful for businesses to make and concentrate on the cash flows of the company. Also, this is a very simple method comparatively (Samuels et al, 2000).Net Present Value (NPV) is the most commonly used method and it utilizes the discounted cash flows to compute the returns from an investment. In this method, initially, all the future cash flows that will be generated by the project are discounted to present value.