Appraisal of a capital expenditure project - Essay Example

Only on StudentShare

Extract of sample
Appraisal of a capital expenditure project

The three projects have different implications on the number of people needed to operate the machines, and vary in costs and capacity. Evaluating Capital Expenditures Choosing among capital expenditure projects should not rely solely on financial assessment. It is also important to undertake a subjective evaluation of each of the projects, in terms of its suitability for the macro-environment. An examination of the PEST (political, economic, social, and technological) conditions will determine which of the firms, if any, must be excluded by environmental conditions, or which would prove exceptionally suitable to these conditions. A risk assessment is another pre-requisite to determine which of the projects may pose extraordinary or undue risk for the company or the workers who shall be involved in the installation or operation of the new machinery. Incremental analysis shall be employed in this study, which requires discounting the existing financial data reflected by current operations, and instead rendering judgment based on the analysis of changes introduced by each project. ...
Download paper


BTA Machine & Tools Appraisal of a Capital Expenditure Project Introduction BTA Machine and Tools is a medium-scale private company located in Brisbane, specializing in machine and tool manufacturing and services. It was founded by husband and wife William and Teresita Anderson, also known as Bill and Terry Anderson (BTA)…
Author : feestkale

Related Essays

Financial Appraisal
These three financial aspects must be that, in order to run or execute them, it necessitates substantial inputs in terms of costs and they must entail a wide range of benefits upon their execution (Kirkpatrick & Weiss 2006). As such, the costs and the subsequent benefits must be subjugated in terms of money or they should be such that, their worth can be estimated considering the monetary terms. Further, it can be said as a systematic process by which alternative utilization of wide variety of resources are examined with a great focus on assessment of factors, which are likely to influence a...
7 pages (1757 words) Essay
Investment Appraisal Project
WACC=wdkd(1-T)+wpkp+wsks Where  Kd = interest on debt  Kp = cost of preference shares  Ks = cost of shares and retained earnings.  WACC is calculated by multiplying the cost of equity by the market value of the equity and cost of debt by the market value of the debt. Cost of equity can be defined as the minimum rate of return that a company must generate and offer to their investors in order to provide a return on their investment and for assuming some level of risk. If the company does not offer this risk to the investors, there is a chance that the shareholders might sell these shares in...
8 pages (2008 words) Essay
Project Appraisal
. 4 Discussion… 6 Recommendation….9. Conclusion…10 Introduction Project appraisal is a structural process through which management uses to determine through careful assessment the most viable project. From a well appraised project, great achievements can be achieved in case the project implementer applies the appropriate skills. Appraisal is done through assessment of data through assumptions and methodologies used when preparing a project. For instance, it involves the work flow, proposed financing, an assessment of the projects managerial aspects, cost estimating, finance validity, and...
8 pages (2008 words) Assignment
Critically appraise the application of traditional capital budgeting techniques.
At the same time, many business organizations failed to survive stiff market competition and subsequently went out of the market. The last decade witnessed a series of corporate scandals and bank failures due to poor managerial accountability and ineffective corporate governance practices. Hence, today’s managements give particular focus to corporate governance principles and long term business decisions. In this context, the concept of capital budgeting is of considerable significance because it evaluates future cash inflows and outflows on a prospective business project and thereby...
18 pages (4518 words) Assignment
Investment Appraisal: Matero Corp
The management will have to evaluate the projects which will generate stable cash flows for Matero PLC for at least 1 year. From the onset, we consider the possible consequences of Matero accepting or rejecting the project of procuring the machinery and plant. For this reason, we emphasise on the determination of the cost of capital whether there will be any form of financial leverage or not. If Matero PLC will decide to use debt financing, there is a hypothesis that the debts will generate higher payoffs for the coming years considering the risk factors that accompanies the borrowed capital....
6 pages (1506 words) Essay
Capital Expenditure and Depreciation
Acquiring fixed assets like building, land, plant and machinery, motor vehicle and furniture fittings are regarded as the capital expenditure. The assets are not to be sold for making profit but that assets should be retained in the business. Capex generally yields gains over a long period of time (Banerjee, 2010). Capex on a financial statement is important as the investors are interested in the amount of capital improvement that he experiences. The declining capex will make the investor cautious as well as abnormal increased values signals that the investor should also be cautious (Jennings,...
6 pages (1506 words) Essay
Revenue and capital expenditure
Internal Sources of finance
5 pages (1255 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!