The Value Of A Investment Project Essay - 2252 Words

Companies invest its capital with the expectation that it will generate income or appreciate in the future and be sold at the higher price or expect some other benefits from it. When the company has several ways how to invest money it has to choose which one is better – they prioritize investment projects. The main criterion to choose an investment project is the value it would accumulate for the company in future. For the purpose of analyzing the value of the money that will be received in future and future value of the money that we invest today Discounted Cash Flow concept was developed. In simple terms, discounted cash flow tries to work out the value of a investment today, based on projections of how much money it s going to make in the future. DCF analysis says that an investment is worth all of the cash that it could make available to investors in the future. It is described as discounted cash flow because cash in the future is worth less than cash today. For example, let s assume that your friend asked you to choose between receiving 250 rubles today and receiving 250 rubles in a year. Chances are you would take the money today, knowing that you could invest that 250 rubles now and have more than 250 rubles in a year s time. If you turn that thinking on its head, you are saying that the amount that you d have in one year is worth 250 rubles today - or the discounted value is 250 rubles. Make the same calculation for all the cash you expect an investment toShow MoreRelatedInitial Erp Implementation Project And Assess The Value Of The Investment At This Time1631 Words   |  7 Pages1. Introduction Thank you for this opportunity to study your recent ERP implementation project and assess the value of the investment at this time. I will provide you a data brief of the current status, and I’ll offer guidance to propel you toward full realization of your investment. In short, the current status of your project is not projected to realize its planned ROI. In fact, you’ve incurred additional costs that could have been avoided. I will guide you through my findings about past effortsRead MoreCash Flow Per Period Of A Project790 Words   |  4 PagesPeriod is the time in which the initial cash outflow of an investment is expected to be recovered from the cash inflows generated by the investment. It is one of the simplest investment appraisal techniques. Formula The formula to calculate payback period of a project depends on whether the cash flow per period of the project is even or uneven. In case they are even, the formula to calculate payback period is: Payback Period = Initial Investment Cash Inflow per Period When cash inflows are uneven, weRead MoreAssignment 3-Capital Budgeting Analysis1724 Words   |  7 Pagesprocess chooses capital projects from a number of potential options based on several factors such as payback periods, internal rate of return, and the net present value for each project. Each factor should work together effectively to ensure the greatest return in the least amount of time. This paper will focus on determining the best financial outcome for a capital budget using these methods and calculations. To gain an understanding of the capital budget process, Project A and B will be analyzedRead MoreThe Main Tasks Of A Financial Manager1549 Words   |  7 Pagestasks of a financial manager, name investment decision, financing decision and dividend decision. Firstly, we will state our understanding of these terms in detail. Then, several quantitative models will be introduced about how to make correct investment decision, and we will explain the relevant qualitative issues that should be considered. In addition, we will discuss the relationship among the three types of decision. Finally, we will analyse articles about investment decision, financing decision andRead MoreTraditional Methods For Evaluating The Capital Investments Essay1020 Words   |  5 Pagestraditional methods for evaluating the capital investments of your selected company in the emerging markets t o reduce risk. Provide a rationale for your suggested methodology. Net present value in conjunction with internal rate of return are the best methods for evaluating the capital investments of your selected company in the emerging markets to reduce risk. Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capitalRead MoreCapital Budgeting Process Should Be Utilized1432 Words   |  6 Pagescompetitive in their perspective markets. They have found that this may be done by some type of investment(s), in the form of acquisition, and or merger. In the world of business, capital budgeting is one of the most important steps that a company or organization can take. This process is called Capital budgeting. Capital budgeting is a process that attempts to determine the future. Before any large project begins, the capital budgeting process should be utilized. Without capital budgeting, your companyRead MoreCorporate Budgeting : On Capital Budgeting1589 Words   |  7 Pagesbudgeting. In ordinary world capital budgeting means analyzing the profitability of investment. Further, how distinct principles are associated with the capital budgeting is explained. T his chapter also introduced a new principle, â€Å"Individual Respond to Incentives†. This principle elaborates how managers reacts towards the deserving incentives. Capital budgeting allow businesses determine best profit generating investment plan and evaluate its profitability. The Capital Budgeting process involve distinctRead MoreCaledonia Project939 Words   |  4 PagesCaledonia Project Team A James Kochiel, Erik Nutt, Lynnell Smothers, Derek Wright January 21, 2014 John Dewey 1. Why should Caledonia focus on project free cash flows as opposed to the accounting profits earned by the project when analyzing whether to undertake the project? Caledonia should focus on cash flows, because free cash flows can be reinvested when received, unlike accounting profits which are shown when earned, andRead MoreAdvantages And Disadvantages Of Investment Appraisal1679 Words   |  7 PagesThe Investment Appraisal are techniques used in an organisation’s overall strategy and decision of capital investment. In general capital investment appraisal are used for ranking projects. A firm can usually have many projects that are appraised at the same time and those techniques will compare the projects and once completed will determine the highest one and this will be implemented. The investment appraisal considered are: ARR, PAYBACK, NPV AND IRR. The ARR (Accounting rate of return) is theRead MoreCapital Budgeting Is A Means By Which Companies Can Evaluate The Long Term Economic Impact On Investment Projects1490 Words   |  6 PagesCapital budgeting is a means by which companies can evaluate the long-term economic impact of proposed investment projects. It comprises both a financial and investment component. The complex nature of capital budgeting offers measurability and accountability for making financial decisions regarding which investments are worthwhile in meeting an organization’s strategic plan. Financial simulations offer the opportunity to understand the complexity of capital budgeting. The New Heritage Doll Company

I Interviewed My Closest Friend, Who I Will Call Annie Essay

For my Investigative Assignment on the concept of identity, I interviewed my closest friend, who I will call â€Å"Annie.† She is a Chinese-American, born to immigrant parents. Her parents immigrated to US from China and had her after. She is fluent in English and both Cantonese and Mandarin, but she feels more comfortable talking in Cantonese because she grew up speaking Cantonese with her parents and her relatives. When I asked her why she learned Mandarin, she told me that her parents wanted her to learn it since it is the most spoken dialect in China. Even though she knows Mandarin very well, she rarely speaks in that dialect since she does not have to use it when communicating with her family. The three words she chose to describe her identity are: Chinese, American, and student. She calls herself Chinese because she is proud of her ethnicity and cultural heritage and not ashamed of being an Asian minority. One Chinese cultural value she appreciates the most is devoting t o family. She and her family all believe that family should be top priority and should always care for one another. She also calls herself as Chinese because she can speak her native language. She believes that language is an important tool constituting one’s identity because by knowing her native language, she can easily identify herself as Chinese. But she also describes herself as an American because she values American culture as well as she is generally very open-minded about things that her parents areShow MoreRelatedNoughts and Crosses14387 Words   |  58 Pagesare still friends, though social divisions threaten their relationship. Callum – a nought – is about to start at Heathcroft High – the Cross school that Sephy attends. Callum’s family have mixed feelings about his new school. His brother Jude, full of hatred for Crosses, does not want him there. His Mum is doubtful, but his Dad is keen. His sister Lynette – a disturbed young woman – lives in a world of her own. Chapter 3 Sephy overhears her dad talking with a blond-haired nought man who has a ponyRead MoreLogical Reasoning189930 Words   |  760 Pagesleading to truth-valued conclusions but with making choices, assessing reasons, seeking advice, etc. Dowden gets the balance and the emphasis right. Norman Swartz, Simon Fraser University v Acknowledgments For the 1993 edition: The following friends and colleagues deserve thanks for their help and encouragement with this project: Clifford Anderson, Hellan Roth Dowden, Louise Dowden, Robert Foreman, Richard Gould, Kenneth King, Marjorie Lee, Elizabeth Perry, Heidi Wackerli, Perry Weddle, Tiffany

Impairment of Assets Longreach Limited

Question: Discuss about the Impairment of Assets for Longreach Limited. Answer: Impairment of assets is discussed in AASB 136. It states about a condition when an assets value diminishes to an extent that it is lesser than its carrying value. The standard details about the accounting entries when impairment of an asset takes place along with the conditions for impairment to happen. The Australian Accounting Standard on impairment is similar to the International Accounting Standard 36. The economic financial crisis of 2008 has made this standard important in the eyes of all the investors and the shareholders. Therefore Longreach Limited should also ensure to check its assets for impairment and if so do the necessary accounting entries. Indications of impairment is the first thing to check before impairment of an asset is done. But it is very crucial to understand that all the items present in the asset side of the balance sheet does not get impaired. Current assets like inventories, contracts for construction of an asset, deferred tax assets, employee retirement benefits, investments in properties held for sale, agricultural assets disclosed at fair value, contracts for insurance and the other non-current assets held for sale are not subject to impairment as they are dealt in other accounting standards (aasb.gov.au., (2007). The reasons for impairment can be internal as well as external. Assets may become out dated due to technological changes or there may be certain assets which have recently become saleable in nature are internal factors whereas factors such as political and economic instability, increase in the market rate of interest wherein it has a negative implication on the asset or such cash generating unit are considered to be factors external to the company. Once an asset passes the test for impairment then the amount that can be realised and the amount at which the asset is presently being carried is compared and if the recoverable amount is less than the carrying amount then the difference of the two is marked as impairment loss and accounted for in the income statement as an impairment loss in the expense side. The said amount is further deducted from the assets present carrying amount (Dagwell et.al.2012). However it is not necessary that once an asset impaired cannot be reversed. There may be indications wherein the carrying amount of the asset is less than its actual recoverable amount. In such a case, the impairment amount should be reversed. But there is a capping to the reversal. It can be reversed to the extent the carrying amount of the asset would have been had such an impairment not happened. Thus some of the major terms that Longreach Limited should know are as under: Recoverable amount: The fair value less cost of selling of the asset or the value-in-use whichever is greater is termed as the recoverable amount of the asset. Carrying Amount: The amount recorded in the balance sheet before impairment is said to be carrying amount. Cash Generating Unit: A group of assets which have the capacity of generating income for the company independently is construed as a cash generating unit. Value-in-use: The NPV of the cash flows that an asset can produce in future is known as the value-in-use (Albrecht et.al. 2011). But it is very important for the Longreach Limited to understand that impairment of goodwill is not same. Impairment of goodwill happens fully specially when an impairment of a CGU happens then the goodwill is impaired first and then the rest of the assets are impaired proportionately. But once a goodwill has been impaired then it cannot be reversed. Resaon behind the same is that AASB 138 does not realise the goodwill that is generated internal to the organization and hence not accounted for (Bond et.al. 2016). Thus if there is an increase in the goodwill after impairment it is said that the internally generated goodwill has increased hence not is not recorded. AASB 136 states that on impairment of an asset certain disclosures are required. They are as under: For each class of asset impaired, the amount of impairment loss recorded in the profit and loss accounted as well as in the line items of the comprehensive income. The amount of impairment loss reversed if any accounted for in the income statement as well as the line items of the comprehensive income. In case of segmental reporting, the impairment loss that is recorded in the income statement and in the equity. Any reversal of the said impairment accounted in the income statement and the equity. In case impairment of goodwill or a material CGU which has goodwill also impaired then the reason behind such an impairment, amount of impairment , if any reversal has happened then the amount of such reversal and in case the impairment or reversal of a CGU has happened then the amount of the same and how it has been allocate amongst the various assets which are a part of the CGU (Hamilton et.al. 2011). Therefore my recommendation to Longreach Limited would be to immediately apply the said standard in the preparation of the financials so that the balance sheet is not overstated or understated. The Company should ensure to value its goodwill carefully and also to check for the indications of impairment so that the true value of the assets are revealed to the investors of the Company. Disclosure requirements should be adhered to so that it is easy for the investors to interpret the various causes of impairment and the calculations thereof. Thus on a concluding note it is understood that impairment reveals the true realisable value of an asset in case of liquidation and also helps to determine whether all the liabilities can be met with the help of the existing assets successfully and sufficiently. As per AASB 136 on impairment of assets, inventory is not subject to impairment as the same is dealt with in AASB 102. The other assets such as goodwill, land and building, factory and plant and machinery will be impaired. Further the brand Crossbow will not be impaired as the companys brand value has not diminished thus it does not show any indication of impairment of the same. Land will be impaired separately as its realisable value is known separately and the balance amount, the goodwill will be impaired first to its full value and th balance after that will be allocated to the rest assets proportionately. Since the value of land is known separately therefore the same is to be impaired first. The impairment loss for land is $200000- $ 171000= $29000. The journal entry is as under: Profit and Loss Account (loss on impairment) Dr...............$29000 To accumulated impairment loss (Land)...............................................$29000 The total impairment is $1680000- $1420000 = $260000. Out of the same the impairment of land will be deducted i.e. $260000-$29000 =$231000. From the same goodwill will be impaired in totality and the balance of $231000-$40000= $191000 will be allocated to factory and machinery to in the proportion of 7:4. Therefore the impairment allocated to factory will be 7/11*191000= $121545 and that to machinery will be 4/11*191000 =$69455 The journal entry will be as under: Profit and Loss Account (loss on impairment) Dr.................$231000 To goodwill A/c.....................................................................................$40000 To accumulated impairment loss (Shoe Factory)A/c...........................$121545 To accumulated impairment loss (machinery) A/c................................$69455 References: aasb.gov.au., (2007), AASB 136- Impairment of Assets, Available at https://www.aasb.gov.au/admin/file/content105/c9/AASB136_07-04_COMPapr07_07-07.pdf (Accessed 19th January 2017) Albrecht, S., Stice, E., Stice, J., Swain, M. (2011).Accounting: Concepts and applications(11th ed.). Mason: South-Western Bond, D., Govendir, B., Wells, P., (2016), An evaluation of asset impairment by Australian Firms and whether they were impacted by AASB 136, Available at https://onlinelibrary.wiley.com/doi/10.1111/acfi.12194/full (Accessed 19th January 2017) Dagwell, R., Wines, G., Lambert, C., (2012), Corporate Accounting in Australia, Pearson: Australia Hamilton, K., Hyland, B., Dodd, J.L., (2011), Impairment : IASB-FASB Comparison, Drake Management Review, vol.1, no. 1, pp. 55-67