FINANCIAL APPRAISAL

Financial Appraisal of Capital Projects



Financial Appraisal of Capital Projects

Introduction

Capital projects Investment policies have given a new perspective to the role of financial management. Investment decisions are one of the big financial decisions, all decisions about business investments ranging from the analysis of investments in working capital, including cash, banks, accounts receivable, inventories and investments represented in capital assets such as buildings, land, machinery, technology and so on. To make the right decisions for the good quality local shopping centre development should consider evaluation and analysis of elements that define the criteria for analysis, flow of funds associated with investment, investment risk and required rate of return. Main objective of this report is to assess whether the proposed capital project of good quality local shopping centre development is feasible in terms of finance, economics and other market factors.

Part A;

Investment Decision Factors

Theere are certain factors that should be considered beforefor making investment decision for the proposed capital project.

Site and Market Survey

The city in which the shopping centre is proposed is a local business at great length in the range of items. This situation "can retain and multiply in the city the funds arising from the higher costs of wages and investment, both as public and private sector that otherwise would be filtered short-term purchases outside the city, creating jobs other geographies, but not only home shopping channels local revenue but attracts customers from outside the city, which are added to the multiplier effect. In turn, turns trade part of their income on wages, taxes and other local costs, which further impact on employment filtering, finally, purchases of supplies, goods wholesalers, and national taxes.

Economic Viability

The spending multiplier in the local economy does not work in the air without a diversified and enterprising trade, rising incomes may not be used in a large proportion in the purchase of goods and services in the city, so that consumers have locally a wide range that ultimately makes the quality of life, vitality of the local economy and creating quality jobs. But economic development is also evident in "the growing number of employers of small businesses and self-employed" and quality of labor contracts because "wage employment in trade has grown in this region over the last period.

Design and Structure

The design and structure of the shopping centre will be recent, technological updated and creative. The Shopping centre will provide state-of-the-art facility to the consumers as well as business owners.

Part B:

Net Present Value and Internal Rate of Return Calculation

Net Present Value (NPV) is the most popular method when evaluating investment projects in the long term. The net present value determines whether an investment complies with the basic financial objective of maximizing investment or not. The net present value determines if the investment may increase or decrease the value of of the company (Helfert, 2002). 

Calculation of Net Present Value and Internal Rate of Return

Following formula has been used to calculate the net present value for the Drumbeat Holdings for capital investment to upgrade its existing electronic ...