# Assignment 2: Cost Benefit Analysis

Anonymous

### Question Description

Please see the attachment as it provided detail instruction on how to complete this assignment, please not that this is a two part assignment. First part must be done via an excel spreadsheet or via Microsoft word document., the 2nd part you must write and executive memo that provide information regarding the 1st part of the assignment. Please let me know if you have any questions.

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ChloeL134
School: UCLA

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Running head: COST BENEFIT ANALYSIS

Memorandum
Name
Course
Professor
Date

1

COST BENEFIT ANALYSIS

2
Memorandum

To: Supervisor

Date: December 2019

From: Finance Officer
Subject: COST BENEFIT ANALYSIS
Opening statement
The business should follow Owen's recommendations. This option generates a shorter
nominal and discounted payback of 2.7 and 3.10 years. It also had a Net Present Value of
276361.18 and the highest internal rate of return of 17.33%. Following these options is likely
to increase the profits generated by the business in any financial year. On the other hand,
Ann’s recommendations have the lowest returns for the business. Undertaking it results in
more profits for the company.

Scenario

Nominal

Discounted

Net present

Internal rate of

payback

payback

value

return

#1 Ann

4.14 N/A

#2 Steve

3.59

#3 Ellen

4.14 N/A

#4 Peter

4.17

#5 Owen

2.70

-16993.56

-1.18%

74079.84

4.67%

-75046.07

-5.51%

5.67

91907.63

4.84%

3.10

276361.18

17.33%

4.43

Brief synopsis
Multiple factors are considered in the generation of cash flows. One evaluates the
growth in revenues from one financial year to the other. The cash flows are divided into the
cash inflows and cash outflows. Inflows are made up of the cash savings and the terminal

COST BENEFIT ANALYSIS

3

salvage value. Besides, the cost elements are other crucial issues. One considers the
additional working capital, the tax expense, the financial cost, and depreciation. It is vital to
add the depreciation at the end, as it is a non-cash item. The information is found from
companies that have undertaken similar projects. It may be found from experts with
knowledge of the project.
Strategic benefits and risks
Various criteria are used in the evaluation of a project. One should consider issues
such as NPV, IRR, and the payback period. These periods may be nominal or discounted. It is
vital to take a project that has the h...

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