Mba Module - Finance for Managers

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Course: Finance for Managers Course code: CONTENTS 1. Report to Directors of Bramble Waste Management a. Introduction b. Net Present Value c. Internal Rate of Return d. Tender Price for weekly Collection e. Tender Price for fortnightly Collection f. Other Financial Considerations 2. Report to Directors of Newtownabbot Borough Council a. Introduction b. Evaluation of the financial strengths and weaknesses of the three businesses short listed c. Company Ranking d. Key Financial Criteria for Consideration e. Further Considerations Appendix 1 Workings for Weekly Collection Appendix 2 Workings for Fortnightly Collection 1. Report to Directors of Bramble Waste…show more content…
Total Revenue Flows associated with the NBC Waste Collection Programme Discount Factor of 12% | CCC | 1 | | 0.893 | £ 2,004,249.20 | 0.797 | £ 1,158,046.50 | 0.712 | £ 425,797.36 | 0.636 | £ 57,257.20 | Table 3. Discount Factor of 12% and associated Costs of Capital for the 4yr period of the contract | (£) | Total Net Cash Flow @ 12% | 3,645,350.26 | | | Initial Outlay | 3,508,000.00 | | | NPV | 137,350.26 | Table 4. Net Present Value Calculation for the lifetime of the contract When using NPV to determine whether or not to invest in a project, the general rule is to accept the project if NPV > 0 and reject if NPV is negative (or zero). The NPV for the proposed NBC contract is, as seen in table 4 is £137,350.26. On this basis NPV the contract does appear a positive investment. To investigate this further the internal rate of return is calculated below. C) Internal Rate of Return The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It will be used in this report to consider the expected return rate of the project in percentage terms rather than in pounds sterling (£). IRR | Initial Outlay | Yr 1 | Yr2 | Yr3 |
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