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Posted By Admin @ Mar 01, 2022

Title: Report on Capital investment analysis

Type: Report

Subject: Analysis business

APA

Capital investment analysis

By: ABC

Dated:

Background

This case study is about the capital investment analysis for robot-guided aluminum window machine. Abdurrahman, controller at Arar Corporation is responsible to provide with the said analysis. The project is related to the automation of the entire window-casing manufacturing line. The parameters that need to be considered for current analysis include net present value analysis, customer satisfaction, scrap reduction, reduced inventory needs, and reputation for quality.

Analysis

The net present Value (NPV) is the key determinant for identifying the project appraisal. It better serves the purpose for profitability measure of a specified project. It is the most effective capital budgeting technique which provides with the opportunity to either accept or reject the project. Net present value (NPV) is the difference between the present value of cash inflows as well as the present value of cash outflows over a period of time. The better the NPV is determined for a project the more it helps in the planning for the investment & the capital budgeting along with the profitability for the projected investment (Jory, 2016).

In case the firm just relies on the net present value then it can be seen that this parameter is showing the significant negative results. It is evident that the negative NPV means the net loss. If the firm to make the decision only based on the NPV value, then the organization should not choose the projected venture. The reason behind it is the projected earnings are less than the anticipated costs and the firm is to bear the costs. In case the anticipated costs are less than the projected earnings then it is the case of the positive NPV (net present value). It is argued that the firm is to choose the projects with the positive NPV. The investments with the positive NPV are better suggested to be chosen. For the said purpose, the cost-benefit analysis is if used, then it helps to evaluate the benefits associated with a decision along with the costs consideration. It also involves the costs saved & the earned revenues for the evaluation purposes (Woo, 2019) and (Ngo, 2019).

The other intangible parameters (for acceptance of the said project) that can be taken into consideration include as follows:

• customer satisfaction,

• employee’s morale,

• reduced needs for the inventory,

• quality-aspects,

• Scrap reduction.

It can be said that a project success or the positivity not relies only on the NPV of the project i.e., significantly negative in the current case. Rather the above said parameters are together producing the positive results for the investment. So, it can be said that the project under discussion can be chosen as the overall projections for the project are positive. So it will be beneficial for the firm to go with the current project. The customer is the king and the employees are the one who provide the ways to satisfy the customers. The customers are happy with the quality-oriented products. So the project for robot-guided aluminum window machine is acceptable (Dawi, 2018).

References

Dawi, N. M. (2018). The influence of service quality on customer satisfaction and customer behavioral intentions bymoderating role of switching barriers in satellite pay TV market. Economics and Sociology , 198-218.

Jory, S. &. (2016). Net present value analysis and the wealth creation process: a case illustration. The Accounting Educators Journal , 25-99.

Ngo, V. &. (2019). Moderating and mediating effects of switching costs on the relationship between service value, customer satisfaction and customer loyalty:investigation of retail banking in Vietnam. Journal of International Studies , 9-33.

Woo, J. K. (2019). Developing an Improved Risk-Adjusted Net Present Value Technology Valuation Model for the Biopharmaceutical Industry. Science Direct , 1-19.