Happy Printers Ltd is evaluating four mutually exclusive projects which are competing for the same investment capital. The company’s main objective is maximising shareholder value. Some analysis has been performed and you have been given the results by your manager who is not familiar with investment appraisal techniques. Project A B C D Payback Period 4 years 5 years 3 years 3 years Accounting Rate of Return 6% 7% 7% 5% Net Present Value £16,320 £(16,100) £16,100 £15,900 Internal Rate of Return 9% 8% 9% 7% Initial Outlay Required £50,000 £35,000 £45,000 £60,000 Required a) Recommend which one of the projects should be undertaken explaining why you have chosen that one. b) Discuss the limitation of the investment appraisal techniques used for the benefit of your manager including reference to academic sources to support your explanations.
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
QUESTION 5.
Happy Printers Ltd is evaluating four mutually exclusive projects which are competing for the same investment capital. The company’s main objective is maximising shareholder value.
Some analysis has been performed and you have been given the results by your manager who is not familiar with investment appraisal techniques.
|
Project |
A |
B |
C |
D |
|
Payback Period |
4 years |
5 years |
3 years |
3 years |
|
Accounting |
6% |
7% |
7% |
5% |
|
|
£16,320 |
£(16,100) |
£16,100 |
£15,900 |
|
|
9% |
8% |
9% |
7% |
|
Initial Outlay Required |
£50,000 |
£35,000 |
£45,000 |
£60,000 |
Required
a) Recommend which one of the projects should be undertaken explaining why you have chosen that one.
b) Discuss the limitation of the investment appraisal techniques used for the benefit of your manager including reference to academic sources to support your explanations.
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