Profit Cash Flows Worksheet

Submitted By jayiwantyou
Words: 768
Pages: 4

Task 1
a). Enter relevant figures into the cash flows worksheet and justify any adjustments to the profit and loss accounts as a result of the information in points a)-j) above.

Further information of the points A-J ought to be the foundation of the profit cash flows worksheet. Find the Reliable and useful information will have a significant influence on the final outcome. The points the most important part need to be considered in the points A-J, because this 5 points is change or indirect effect the number of the cash flows worksheet. Like the point B be given directly the expected anticipated life is about 15 years, also basis the point D, all the equipment will loss their resale value, so in the cash flows worksheet they don’t need to consider the residual value of the equipment. The government grant is being received in year 1, and basis of the summary of costs the government grant will be the £600000, and the company will have this funds in the first year. Annual management fee is different batten this two project, but they all being apportion about 15000£ by the head office, this will be directly reflected in the report like this: the Annual management fee in the small project originally is 25000£, but when the office apportion is 15000£, the final result it will be 10000£. Each project need initial cash reserve to start the business, small project is £1.5million, and the large project is £2.5 million, but basis the point I can know the initial cash reserve will paid back in the final year, so this important information must be reflected in the table. Also cannot be ignored is that other points A.C.D.F.H.J. these point introduced the financial situation very carefully, great extent exclude the interference terms improve the accuracy of the cash flows worksheet.

b). Using the figures in the calculations worksheet for Net present value (NPV), Internal Rate of Return (IRR), accounting rate of return (ARR) and Payback Period, state, with reasons which project you would accept.

According to the analysis of the calculations worksheet, in comparison, the small project is a good investment, relatively of the large one. This can be seen from the following several aspects. First thing need to consider is the NPV, If NPV > 0, then the project is accepted, if NPV < 0, then the project is rejected (Bas 2013). So the comparison of these two projects, both projects NPV is greater than 0, and the small one has higher NPV. Consider of the company has discount rate about 10%, and analysis of data IRR, the large project is10.8%, it can get a profit. But small project is 13.1% higher than large project, it means more profitable. So analysis of results is the small project has batter Internal Rate of Return. The cost of capital of the company is 10%, the ARR of this two project both Higher than this data, the small project is 20%, the large one is 15%. Contrast the data, small projects has higher accounting rate of return, it