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Essay / Research Paper Abstract
This 13 page paper looks at the case of Engineering Products PLC. The firm is considering a capital investment for the Steel Tube division. The paper looks at how the project may be assessed and adjusts existing projections. The first part of the paper considers what information is needed and what information in the case is irrelevant. The projections provided are adjusted to allow for additional information. The paper then discusses the different assessment methods, undertakes an assessment using rerun on investment, payback period and net present value before making recommendations. All calculations are shown. The bibliography cites 4 sources.
Page Count:
13 pages (~225 words per page)
File: TS65_TEengineer.doc
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Unformatted sample text from the term paper:
adjusted project projection 11 Table 3 Return on investment 12 Table 4 NPV for project 12 5. Other Strategic Considerations 13 6. Conclusion 13 References 15 1. Introduction The Steel Tube division of Engineering Products PLC has
a proposal for installing a new computer numerically controlled (CNC) milling machine. The accountant has already prepared to projections for the following four years which demonstrates that the capital investment,
?240,000, is not viable. The assessment made demonstrated in three out of the four years investment would result in higher costs than sales levels. However, when looking at the way
in which the projections have been prepared there are a number of assumptions which may be erroneous and negatively affecting the projection outcomes. In order to assess the potential investment
it is necessary to first to determine the factors which are relevant to the investment and utilise those in the calculations. Additional consideration may also be given to the way
in which the investment is assessed, the organisation currently uses the payback and return on investment, but alternative methods are available. It is only by looking at additional investment assessment
models that the most appropriate approach may be chosen for the project. In addition to the economic/financial aspects to the investment decision there may also be other strategic considerations that
should be taken into account, for example the way in which a product may support a firms reputation and either directly or indirectly supports other sales (Thompson, 2008). 2. Information Needs
When assessing an investment the first stage is that of information gathering. The required data may be summarised as the direct and indirect costs and revenues that will be impacted
by the investment over the period of the project. This does not mean the assessment is only financial. Factors such as damage or enhancement of image or reputation may have
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