BTEC Programme Title: Pearson BTEC Level 3 National Extended Diploma in Business

Unit or Component Number and Title: Unit: 13 – Cost and Management Accounting

Assignment Title: Investment Appraisal Methods

Scenario:

Your line manager at Spex Ltd was impressed with your reports and wants you to now expand your knowledge into other areas.

Investment appraisal is an integral part of capital budgeting, and is applicable to areas even where the returns may not be easily quantifiable such as personnel, marketing, and training.

You are to look into investment appraisals and specifically the appraisal of long-term capital investment. Your manager will provide a relevant case study and data. Your findings should be included within a presentation which includes detailed speakers notes or voiceover.

Task 1:

Task 1.1: Explain with at least three examples the purpose of long-term capital investments and the importance – to include definitions – of the following  investment appraisal methods for strategic planning by management given the time-value of money:

• payback
• accounting/annual rate of return
• net present value
• internal rate of return

You should then apply the following main investment appraisal techniques to alternative capital investment proposals using the  data provided in Appendix 1:

• net cash flows (undiscounted)
• payback period
• accounting rate of return
• net present value.

Task 1.2:  Explain how financial and non-financial considerations and factors may influence the final decision.

Examples of non-financial and qualitative factors could include some or all of the following:

• time
• risk
• social responsibility
• the environment and sustainability
• business ethics (e.g. impact on stakeholders)
• brand/reputation
• potential impact elsewhere in the company

Your analysis should also include a reference to opportunity cost and the implications of depreciation.

Relate this to an analysis of  your results from Task 1.1.

Task 1.3: Based on the results of your investment appraisal calculations as well as other factors such as the analysis of the financial and non-financial considerations, evaluate the long-term capital investment proposal. From this,  formulate a set of appropriate and relevant recommendations including your preferred option.

Your recommendations should take into account internal and external stakeholder needs and reflect the business’s social responsibilities. Provide your findings and recommendations in the form of a presentation.

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