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代写加拿大assignment（Financial

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Executive Report for Peaches plc. -about Strategic Option Choosing Table of content Calculation for Investment Appraisal Methods 3 1.1 Accounting Rate of Return 6 Payback Period 7 Net Present Value 8 1.4 Internal Rate of Return 9 Recommendations 12 Reference 17 Appendix 1 18 Appendix 2 19

Calculation for Investment Appraisal Method To decide which option is more suitable for Peaches plc’s development, it concerned to using variety investment appraisal methods to evaluate each project. This report will demonstrate four appraisal methods: accounting rate of return (ARR), payback period, net present value (NPV) and internal rate of return (IRR) to evaluate three options and present a suitable suggestion at the end. Initially, from table 1 to table 7 which are illustrate each option’s initial investment, profit/loss and cash flow. Specifically, table five is to calculate option 1B profit/loss based on adjust option 1A’s profit/loss. Table 1: Initial Investment-Strategic Option 1A

£m
Patent	5
Additional manufacturing unit	2
High end manufacturing non-current assets	6
Land	3
Working capital	1.2
Total	17.2

Table 2: Cash Flow for Strategic Option 1A

Year	Profit/loss £m	Depreciation £m	Interest £m	Dispose land £m	Working capital £m	Cash flow £m
1	(2.3)	1.3	0.3			(0.7)
2	1.5	1.3	0.3			3.1
3	6	1.3	0.3			7.6
4	8	1.3	0.3			9.6
5	10	1.3	0.3			11.6
6	10	1.3	0.3			11.6
7	8	1.3	0.3			9.6
8	6	1.3	0.3			7.6
9	4	1.3	0.3			5.6
10	2	1.3	0.3	3	1.2	7.8
Total	53.2

Table 3: Initial Investment-Strategic Option 1B

£m
Patent	5
High end manufacturing non-current assets	6
Purchase manufacturing unit for lease	1.4
Working capital	1.2
Total	13.6

£m
Patent	5
Additional manufacturing unit	2
High end manufacturing non-current assets	6
Land	3
Working capital	1.2
Total	17.2

Table 4: Cash Flow for Strategic Option 1B

Year	Profit/loss £m	Depreciation £m	Lease payment £m	Working capital £m	Cash flow £m
1	(1.8)	1.1	(0.8)		(1.5)
2	2	1.1	(0.8)		2.3
3	6.5	1.1	(0.8)		6.8
4	8.5	1.1	(0.8)		8.8
5	10.5	1.1	(0.8)		10.8
6	10.5	1.1	(0.8)		10.8
7	8.5	1.1	(0.8)		8.8
8	6.5	1.1	(0.8)		6.8
9	4.5	1.1	(0.8)		4.8
10	2.5	1.1	(0.8)	1.2	4
Total	58.2

Table 5: Adjustment to 1B’s profit from 1A’s profit

Year	Profit/loss-1A £m	Depreciation £m	Interest £m	Profit/loss-1B £m
1	(2.3)	0.2	0.3	(1.8)
2	1.5	0.2	0.3	2
3	6	0.2	0.3	6.5
4	8	0.2	0.3	8.5
5	10	0.2	0.3	10.5
6	10	0.2	0.3	10.5
7	8	0.2	0.3	8.5
8	6	0.2	0.3	6.5
9	4	0.2	0.3	4.5
10	2	0.2	0.3	2.5

Table 6: Initial Investment-Strategic Option 1C

£m
Non-current manufacturing assets	4
Working capital	1.2
Total	5.2

Table 7: Cash Flow for Strategic Option 1C

Year £m	Profit/loss £m	Depreciation £m	Working capital £m	Cash flow £m
1	2.1	0.4		2.5
2	3.6	0.4		4
3	3.6	0.4		4
4	3.6	0.4		4
5	2.6	0.4		3
6	2.6	0.4		3
7	2.6	0.4		3
8	1.6	0.4		2
9	1.6	0.4		2
10	0.6	0.4	1.2	2.2
Total	24.5

1.1 Accounting Rate of Return The first appraisal method is accounting rate of return (ARR) which can be defined as: (Watson and Head, 2007). It takes the average accounting operating profit that the investment will generate and expresses it as a percentage of the average investment made over the like of project (Mclaney and Atrill, 2012). Here is table eight for three option’s ARR. Table 8: Calculation of ARR for Three Options

Cash flows	Strategic Option 1A £m	Strategic Option 1B £m	Strategic Option 1C £m
Outlay	17.2	13.6	5.2
Year 1	(2.3)	(1.8)	2.5
Year 2	1.5	2	4
Year 3	6	6.5	4
Year 4	8	8.5	4
Year 5	10	10.5	3
Year 6	10	10.5	3
Year 7	8	8.5	3
Year 8	6	6.5	2
Year 9	4	4.5	2
Year 10	2	2.5	2.2
Total profit	53.2	58.2	24.5
Average annual profit	5.32	5.82	2.45
Accounting rate of return	30.93%	42.79%	47.12%

1.2 Payback Period Secondly, to calculate the payback period it means measures the number of years it takes to recover the original investment from estimates of the yearly cash flows over its whole life (Mott, 1997). Table behind present the cash flow which have been adjusted and calculate the payback period at the end for three options. Table 9: Calculation of Payback Period for Three Options

Cash flows	Strategic Option 1A £m	Strategic Option 1B £m	Strategic Option 1C £m
Outlay	17.2	13.6	5.2
Net cash flows
Year 1	(0.7)	(1.5)	2.5
Year 2	3.1	2.3	4
Year 3	7.6	6.8	4
Year 4	9.6	8.8	4
Year 5	11.6	10.8	3
Year 6	11.6	10.8	3
Year 7	9.6	8.8	3
Year 8	7.6	6.8	2
Year 9	5.6	4.8	2
Year 10	7.8	4	2.2
Payback period	3.75 years	3.68 years	1.68 years
Workings	3+=3.75	3+=3.68	1+=1.68

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