From the calculations it shows that the Transport Project is worth going for, but with the i?? 150,000 Lee Ltd have another option which they could use if they think the transport is not worth wile. Lee Ltd has the option to invest their money in a new Networking Project which they could get to improve their old one. As the figures show Lee Ltd that the NPV is more then the networking project from 130. 80. The Networking Project has a NPV of i?? 4,500 and the transport project have a NPV of 4630. 80.
This shows that the NPV on the 1st project of transport is better and greater where they make more returns. Also another downfall for the Networking Project is that the ARR for that is 25% which is way less then the 1st project of 30. 747%. This shows that the sales return they are receiving by the network project is much les then the transport project. But the transport project has 1 downfall to the investment plan as its payback period for the time is 3 year and 6 months, where as the networking project is only 3 years.
It isn’t always the fact that a business should see that if they pay off their debt early they would make a profit but to see how it would benefit them in the long run. If Lee Ltd is looking to put their investment into a short-term basis schedule then the Networking Project is ideal, but looking from the figures it shows us that on the long run the transport project will be best for them to go ahead with. As it had been mentioned before that the transport project is more reasonable to go ahead with as calculations presented showed clear understanding of the NPV, ARR and PBP.
But to be sure all the calculation wee not precise but estimates, this can effect many aspects in a business world as everything is not precise as petrol prices may vary and increase in taxation. All this is not listed in calculations they carry out but they are predicted as estimates. Benefit for Transport Project The benefit Lee Ltd would get from investing in the Transport Project is that they could run 24 hour shifts to get good out to customers and not rely on firm vehicles. The problem with vehicles rented is that if any damage is caused then charges are high.
Being able to deliver goods on time also makes a difference as it leaves customers satisfied. Advertisements cold be made on their own vehicles which would increase publicity. Benefits of Network Project There are many benefits of investing in a network project as they could make the accounting easy as it would not require high level of skill to do them. Having a well updated network would help Lee Ltd to get their business online and be able to sell goods on the internet. This would lead to a 24 hour service available to everyone.
The conclusions which I have decided for the project to be invested in would be the transport project as it shows better reasonable calculation from the NPV and ARR. These aspects show that Lee Ltd would get a higher rate in return if they were to keep the investment continued for a longer basis. If the PBP is longer the Networking Project this would not make a lot of difference as to paying back period. The idea of having the Networking Project is not bad as this would help them in the future to get their business online and be able to publicise their business.