Why is investment appraisal process so important

Why is investment appraisal process so important Investment decisions are of critical importance to all companies, since they determine both their potential to succeed and their ultimate cost structure. Investments usually implicate high initial cash outflows and thus tie up substantial funds. Sound investment decisions are crucial, therefore. Yet, according to a highly complex and fastly changing business environment they remain a challenging management task. A capital investment appraisal is used to make sure value for money with regard to developing an estate strategy and capital project. It is not an indication of loss or profit for the company as a whole but rather a comparision of costs with regard to those areas of the estate where there is an opportunity or a demand for change. (Baum T., Mudambi R., 1999). Capital investment decisions are the important criteria to be used by an organization in order to apply its corporate strategy. Because of this, it has to include strategical decisions, marketing decisions and human recources implications that are an overall business review. These decisions include; expansion, cost reduction, market development, acquisitions and disposals, lease or buy. It is possible to evaluate the validity of the opportunities for an investment appraisal by comparing the expected benefits with the anticipated costs as its purpose. ( Kind J, 1999 p.122) (b) What is the payback period of each project? If AP Ltd imposes a 3 year maximum payback period which of these projects should be accepted? Payback for Project A Years Net cash flow Cumulative net cash flow  £000  £000 0 (110) (110) 1 20 20 2 30 50 3 40 90 4 50 140 5 70 210 Total 3+=3.4 years Payback for Project B Years Net cash flow  £000 0 (110) 1 40 2 40 3 40 4 40 5 40 Total = 2.7 years c) What are the criticisms of the payback period? Payback is a type of measurement that indicate the necessary period of time required for the recovery of the initial investment. There is a necessity of clarification that the payback can not be used as an only decision criterion because it does not include any profits or cash flows occurring after the payback period. Second, payback gives equal weight to all cashflows before the cutoff period, despite the fact that the more distant cashflows arc less valuable.( Mott, 2005, p 217.) It is a compulsory for a company to determine a proper end time for the investment in order to use payback method. Too many short-lived projects will be chosen by the company rather than long term ones in case of using the same date without taking into account the project life. Also it can be considered as an effective auxiliary investment appraisal tool since some possible risks that may arise from an investment project can be indicated by payback. As paralel to this, it might be thought as an important factor for the consideration of the economic life of a project as a consecuence of a sensitivity analysis. (Gà ¶tze U, 2008, p.46) Although it has weaknesses, payback will be used as one of the main decision making tecniques because the simplicity is the keynote of this investment appraisal method. And also it has short term perspective that leads decision making. In case of consideration of more complex projects,we should use advanced analysis like Net Present Value method and think carrefully what might be at risk. ( Dyson, 2007, p.422) (d) Determine the NPV for each of these projects? Should they be accepted explain why? NPV for Project A Years Net cash flow Discount factor Present value  £000 12%  £000 1 20 0.893 17.86 2 30 0.797 23.91 3 40 0.712 28.98 4 50 0.636 31.8 5 70 0.567 39.69 _______ Total present value 141.74 Less: Initial cost 110 Net present value 31.74 NPV for Project B Years Net cash flow Discount factor Present value  £000 12%  £000 1 40 0.893 35.72 2 40 0.797 31.88 3 40 0.712 28.48 4 40 0.636 25.44 5 40 0.567 22.68 _______ Total present value 144.2 Less: Initial cost 110 Net present value 34.2 Both projects should be accepted, since both Net Present Values are positive according to ACCEPT-REJECT decision making techniques. If we use RANKING decision making techniques; Project [emailprotected] 12% Discount Rate  £000 B 34.20 A 31.740 As it can be seen from the rankings Project B is more preferable with a higher NPV. (e) Describe the logic behind the NPV approach. NET PRESENT VALUE METHOD One of the most widely known and used technique of financial analysis is Net Present Value method. It is a comparision of the value of money now and that of the future. A pound today is precious more than a pound in the future, because the buying power of the future money is eroded by the effect of inflation. Importance of Time Value of Money in Financial Management; The time value of money is the fundamental for financial management because it is the aid of determining present value in todays paund of the future net cash flow of a project. Therefore you can obtain a comparision of that sum of money with necessary amount of money to carry out the project. Any of financial decisions must not be taken in case of the equality of inflows and outflows because of uncertain future conditions. In order to purchase assets the inflow must be above the outflow. If the purpose is to raise the funds then outflow must be kept more than the inflow. And it is required that the inflow and outflow can be matched. In order to make effective financial decision, the flows expected in the future must be adjusted on the purpose of being compared with the current ones.( Ramagopal, 2008, p.221) The procedure of Net Present Value Calculation; Net present value method can be used to examine the profitability of all investment projects. If the net present value > 0 The project is feasible If the net present value < 0 The project is not feasible If the NPV is greater than the cost, the project will be gainful for the company. In the case of having more than one project, you should calculate Net present value of all, and the superior one that has the most difference between Net present value and cost must be chosen. Project that its net present value is bigger than zero, are considered to raise the value of the company. (Mott, 2005, p216) The advantages of this method; It puts forward the value of 1 pound of today is more than that of 1 pound in the future. Because the return of todays investment will be received earlier than any of the future investments. The estimated cash flows and the opportunity cost of capital are examined by this method. In order to calculate the net present value for the whole project, the current values of the cash inflows and outflows could be added since present values are todays value. ( Kind J, 1999 p.127) The weakness of the model is that cash flows are accepted to be seen on the last day of the year depending on discounting once a year. On the other hand the assumption of the constant cost of capital during the whole life time of the project can be considered as the another weakness of the method. (Proctor, 2009, p.192) (f) What would happen to the NPV if: (1) The cost of capital increased? If the cost of capital increases, discount rates decrease, which means that present values of cashflows also decrease. As a result, NPV will also decrease, because there will be a decrease in the sum of total present values of cash flow (2) The cost of capital decreased? Decreasing the cost of capital will increase discounting rates, which means an increase in total present value of cashflows. Depending on this increase, NPV which includes the sum of total present values of cashflows will inevitanly increase. (g) Determine the IRR for each project. Should they be accepted? The net present value is most popularly alternated with internal rate of return (IRR). IRR is defined as the discount rate or cost of capital at point where the benefits are balanced with its costs, the net present value is equal to zero and so, can be considered as break even rate. It can be used as measure of capital efficiency. Advantages of IRR Liquidity is considered in this method. It emphasize timing of net cash flow. The exact % return on investment is given NPV FOR PROJECT A: Years Net cash flow Discount factors Present value  £000 17% 22% 17% 22%  £000  £000 1 20 0.855 0.82 17.1 16.4 2 30 0.731 0.672 21.93 20.16 3 40 0.624 0.55 24.96 22 4 50 0.534 0.451 26.7 22.55 5 70 0.456 0.37 31.92 25.9 _______ ______ Total present value 122.61 107.01 Less: Initial cost 110 110 Net present value 12.61 (2.99) IRR= positive rate + -range of rates= = 17%+-5% =21.04% At 21.01% discount rate the NPV is equal to zero. NPV FOR PROJECT B: Years Net cash flow Discount factors Present value  £000 22% 27% 22% 27%  £000  £000 1 40 0.82 0.787 2.863 2.581 2 40 0.672 0.620 3 40 0.55 0.488 4 40 0.451 0.384 5 40 0.37 0.302 _______ ______ Total present value Less: Initial cost 110 110 Net present value 4.52 (6.76) IRR= positive rate + -range of rates= 22%+-5% =24% Since both projects IRR are bigger then cost of capital; both of them can be accepted. (h) How does a change in the cost of capital affect the projects IRR? The IRR value of the project is not affected by a change in the cost of capital. The point that must be taken into account here is that IRR value must not be below cost of capital for the safety of the investment. (i) Why is the NPV method often regarded to be superior to the IRR method? The NPV calculation will usually always provide a more accurate indication of whether or not a project should be undertaken or not.However, since IRR is a percentage, and NPV is shown in money, it is more appealing for a manager to show someone a particular rate of return, as opposed to money amounts.

Similarities Between Northern and Southern American Colonies

The Northern and Southern colonies had many similarities between the years of 1607 to 1763, but the idea that they were more similar than different is vastly incorrect. The economy in the Southern colonies was based off of planting and slave labor, which was very common, while land in the Northern colonies, for the most part, was not fertile enough to support planting. Another difference between the North and South was that government and the church had very close ties in the North, compared to a representative self-government in the South, separate from any church. People and towns were too far apart for churches to flourish in the South, whereas in the North, religion was very important and often taken to extremes. In the Southern colonies, tobacco was a huge crop, and the economy of several colonies was based almost entirely off of it. The history of tobacco is relatively short—by 1612, John Rolfe had perfected methods of growing tobacco that eliminated most of the bitterness of the leaf. After the first boatload of tobacco was sent to Europe, the European people quickly developed a high demand for it, one which American colonists were more than happy to fulfill. Because of the sudden incredibly high demand for tobacco, colonists were overwhelmed, and planted tobacco anywhere they could, including the ground next to the street and between graves. The tobacco-growing frenzy was so huge that colonists in the South had to import some of their foodstuffs at first, for they were not able to grow it themselves with all their land being used for tobacco. Because the crop of tobacco robs the soil of its nutrients so quickly, the demand for land exponentially increased, which led to an increased need for workers, preferably cheap, which is when wealthy planters turned to slavery. In comparison, the land in the Northern colonies was mostly glaciated soil, with stones in the dirt forced to the surface after every winter. Because of the rocky soil, staple crops did not grow well and so black slavery was not profitable in the North. Colonists who realized they would not be able to make much of a living off of the land became good at other things. Shipbuilding, fishing, and commerce were among the main professions in Northern colonies, due to the excessive fishing opportunities. Governing styles is another major difference between the Northern and Southern colonies. The first self-controlled government was established in Virginia, one of the Southern colonies, in 1619, the House of Burgesses. This was somewhat similar to the British parliament, met once a year in Jamestown, and was made up of twenty-two people. These twenty-two people were the governor of the colony, six prominent citizens hand-selected by the governor, and fifteen burgesses, or representatives, from varied locales, usually the larger plantations in the area. Overall, the people controlled the government in the South. This fact could be disputed about Northern government. In the Northern colonies, the government was more inclusive than it had been in the past in that all freemen could vote. Freemen were adult male landowners who belonged to the Puritan congregation. All male property owners could be involved in town government, regardless of whether or not they were Puritan. They would participate in town meetings, where matters large and small were discussed, debated, and solved by the people of the town themselves. According to the doctrine of the covenant followed by Northern colonists, the role of government was to enforce God’s laws, which applied to both believers and non-believers. Even with the government being so religious, clergymen were not allowed to hold an official political office, which led to the idea of the separation of church and state. The separation of towns was more of an issue in the South than the separation of church and state, in terms of religion. Because of the vast amounts of land needed by plantation owners to grow tobacco and other staple crops, towns and people were spread out, which slowed urban development significantly and also made the establishment of churches and schools difficult and expensive. Nevertheless, there was still religion in the Southern colonies—the vast majority of colonists were Anglican. In the Northern colonies, there were many churches, of several religious groups. Puritans and Quakers were the dominant religious groups in the North, though Quakers would not abide by laws set by the Puritans, so they were fined, flogged, and banished. In one extreme case, four Quakers, one a woman, who defied expulsion from their colony, were hanged. An extremist Puritan by the name of Anne Hutchinson claimed that a holy life was no true sign of salvation, and that the truly saved were going to heaven no matter what they did in their life, so they would not need to obey neither God’s nor man’s law. At the time, this was considered antinomianism and extreme heresy, so Anne was banished from her colony and forced to move. In conclusion, the Northern and Southern colonies did have many things in common, but the thought that they were more similar than different from the year 1607 to 1763 is an immense misconception. In the Northern colonies, it was not possible to grow staple crops because of the rocky soil, so settlers turned to other ways to make a profit than agriculture and slavery, while in the South, slavery and tobacco farming were the sole source of income for several colonies. The government in Northern colonies had close ties to the Puritan church, while in Southern colonies the style of government leaned towards self-representative. Churches were not common in Southern colonies, while they were of utmost importance, and often taken to extremes in Northern colonies.

Learning Theories and Instructional Design Essay

This article discusses the principles of adult learning theory. More specifically, Kimbarow relates adult learning theory to effective methodologies that can be employed in treating patients with aphasia. For Kimbarow, the major principles of adult learning theory are the ability to recognize that adults are self-directed individuals and that it is essential for instruction to be prepared such that it is culturally and socially sensitive in meeting the needs of the learner. Kimbarow also discusses the life participation approach, or LPAA. The life participation approach emphasizes the role of the patients’ overall quality of life in the care that the patient receives. This complements the adult learning theory as it further emphasizes the impact that patient involvement has in the treatment and planning of activity programs. The study offered these recommendations: A patient will have a better quality of life if the patient plays an active role in the planning of their course of treatment and if the instruction meets their cultural and social needs. By recognizing and planning instruction in this manner, the instructor will be successful in preparing activities that meet the needs of the adult patient. Review: This is an interesting and current article for those who want to explore the premise of adult learning theory. However, the article is limiting in its discussion of adult learning theory as it relates only to aphasia patients. The article would be more effective if it contained further discussion into the effectiveness of adult learning theory to patients or students with other conditions or in other learning environments. Lee, D. , Belifore, P. , Budin, S. (2008). Riding the Wave. Teaching Exceptional Children, 40(3), 65-70. Summary: In their article, Lee, Belifore and Budin discuss the importance of differentiating instruction to meet the needs of all students in the classroom begins with the planning process. The authors’ recognized that different teachers plan and deliver lesson plans in different ways. However, they recognize that the types of lesson plans utilized and implemented by classroom teachers can impact the way that the information in the lesson is disseminated to the students. The study offered these recommendations: According to the authors’, reducing student punishment should result in an increase in student accountability and responsibility. â€Å"High probability request sequences are positive interventions improve student compliance through increased student workload and the removal of negative consequences: (Lee, Belifore and Budin, 2008). It also creates an environment of problem solving, whereas students are accountable for their work no matter what. In doing this, the punishment for not turning in work does not result in a failed grade. Review: The article is an important tool for those individuals seeking an interesting perspective in the need for differentiating instruction. At the same time, the article offers an innovative perspective on the role of consequences in the education system. The recommendations made by the authors’ are best suited for the traditional classroom setting. Felder, R. M. , & Brent, R. (2005). Understanding student differences. Journal of Engineering Education, 94(1), 57-72 Summary: In their article, Felder and Brent discuss the different learning styles that must be taken into consideration in the development of course curriculum and evaluation methods. As the authors’ describe, these various methods are used to assess student understanding of subject material. Felder and Brent point out that students in the classroom setting tend to be very diverse in culture and have different levels of motivation to learn. The study offered these recommendations: Because students have different attitudes towards their instructor as well as other students, instruction must be designed to respond to the different â€Å"attitudes about teaching and learning, and different response to specific classroom environments and instructional practices† (Felder & Brent, 2005). Due to this, the instructor should understand learning differences to facilitate, structure, and validate successful learning. Review: The study offers an important perspective as to the diverse needs of individuals in the classroom setting. The study would be more effective if it made specific recommendations as to instructional design modifications that can be used to reach out to students in the learning environment. The article encourages further reading and investigation into the subject that can only better the instructor in planning instructor to meet the needs of students.

Pros and Cons of Homeschooling for Military Families

With military families changing duty stations an average of six to nine times over a 20-year career, homeschooling has a distinct appeal. Ensuring that military kids get a high-quality education can be challenging. It’s no secret that states may have discrepancies in educational requirements (though Common Core serves to narrow these gaps) and this can lead to gaps or repetition in a child’s education. While there are programs in place to help children keep consistency in their academic journey, there are no guarantees. As a result, some military families end up thinking about whether part-time or full-time homeschooling might provide a workable solution.   Parents considering making the switch to homeschooling should consider the pros and cons of this form of education before leaving traditional schooling behind. Homeschooling Benefits Homeschooling allows children to follow an individualized learning plan. Whether you decide to use a correspondence program or complete your own lesson plans, you can work at a pace that fits your child’s unique learning style. And if your children have different approaches and strengths in school, you can use different curriculum providers for different members of the family. Homeschooling also provides flexibility for families. If youre facing a military move in the middle of the school year, no problem! You decide when â€Å"summer† vacation occurs. You can give your child three one-month breaks throughout the year, a standard three-month summer, or whatever works for your family. To keep the kids on track, give them a book list to read on your travels, and let them prepare a presentation on their favorite. With homeschooling, the curriculum progresses consistently at your child’s unique learning rate, no matter where you are. From Germany to Lewis-McCord, you’re covered on every base! This is a huge benefit for military families. Many home teaching and correspondence programs have online options that allow you to connect to top-tier teaching facilities. Homeschooling Challenges One of the great things about school is the social interactions they allow children to have with peers. Homeschooling a child limits these interactions, but, fortunately, many military bases have activities and camps that allow kids to connect with one another. You can also get involved with a local place of worship or community recreation facility to find opportunities for children to get out of the house and meet new friends. You may also be able to get together with other homeschooling families, which will give the kids an opportunity to socialize or work on team projects. Parents who homeschool also face the challenge of deciding whether theyre equipped to teach their children a variety of subjects. Many people struggle in at least one subject area, and some states have determined that parents should be qualified to teach their children. As a result, they have implemented homeschool parent qualification requirements. Make sure you meet these requirements before you start down the homeschool path. If you struggle in a certain area, a correspondence or distance learning program might make more sense for that subject. If several subjects are difficult for you, homeschooling may not be a good fit for your family at all. It’s all about knowing your own limits and doing what’s best for your children. That said, if there are other homeschooling families nearby, you may be able to rely on other parents’ strengths in areas where you’re a little weaker, and vice versa. Keep in mind that should you be reassigned to a different city, youll likely lose access to these parents. Finally, homeschooling your children may mean they miss out on college scholarships from participating in sports or other extracurricular activities. However, changing duty stations in the middle of high school might have the same effect. To help your teens qualify for college scholarships, you may want to consider enrolling them in community college courses and programs that will demonstrate their initiative and academic ability instead.