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Investment Appraisal - Assignment Example

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Investment Appraisal

Investment Appraisal

The growth stage is also evidenced by the existence of sufficient resources that will be enough for the organization to open up to new opportunities. Tyneside gravel organization is currently faced by three main decisions. The first decision that Tyneside organization needs to consider is the need to expand as a way of meeting the demand of more customers. Through expansion it will be possible for the organization to open up to more opportunities. The organization needs to make a stable decision on the need to expand especially because one the area they seek to move in doesn’t have enough sand and gravel which would only add to the inconveniences (McEvoy, 2012). Tyneside gravel organization also needs to make a decision about having a similar stand especially for the autocratic managing director who fears taking into new and innovative methods which are mostly useful in adding to the success of any business. Tyneside organization is also faced by a third and very important decision of choosing between the most viable expansion site between Cleadon Hill and Burdon Farm through a consideration of various factors such as market and cost of leasing. Market is one of the major factors that affect the success of a particular organization because it affects both internal and external efficiency thus making it necessarily for Tyneside Gravel to put it into consideration. The issue of the market should be considered relative to Claedon Hill especially based on the fact that one of the management has secured a promise with a top contractor in the region to buy from the company should they decide to take on the Claedon Hill farm.

By having the Claedon Hill as a site the company is more assured of a constant income since it will be able to make 240000 tons per year for the first year which is an assured estimate due to the Mowlem agreement. The company also estimates market sales of about 200000 tons per annum for the next three years. Lease is also a factor that the Tyneside Company should consider on the basis of the actual cost of the lease and the amount the company would spend on development of the lease and the time taken for the development as this is likely to affect the viability of the company in future. On signing the Claedon Hill lease Tyneside company will have to part with 500000 dollars which will be paid immediately while the time taken to develop the site will be a year which will cost the company 95000 dollars including the installation of machinery required for use in the site. The Tyneside Company on the other hand should also be able to analysis the Baldon Farm market which has a number of customers within the site but its viability will highly depend on securing more customers on the south. Market sales figures are expected to attract a 300000 tons buying power per annum. On a more positive trend the company expects to have a build on its market by the fifth year of about 900000 tons per year which is expected to continue over the remaining part of the project. The cost of lease in the Baldon Farm too will take into account the actual cost at the time of immediate lease, cost of development and the time that will be taken to end the work. The firm has been offered a deal to pay 700000 dollars at the initial lease coupled with the cost of development which is expected to be about 400000 dollars especially because the area is remote and requires more of infrastructural development. Question 2 Operational risks Every business that seeks to expand its ground is faced by several challenges that are commonly referred to as business expansion risks. Competitive business expansio ...Show more

Summary

Tyneside gravel organizations are an organization that is in the growth stage in the organization development cycle. This is especially because it’s in the growth stage that an organization is characterized with a need to expand in terms of its size and the number of customers. …
Author : qmarvin
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