EXECUTIVE of these methods and concludes each appraisal method

EXECUTIVE SUMMARYThis report analyses the viability of funding an expansion project for PLC Plc using average rate of return, payback period and internal rate of return as investment appraisal methods which all confirm the investment should prove profitable. The analysis is limited by dated literature available, basic assumptions of the author and theories used assume knowledge of PLC’s resources The sources of finance considered concluded that rights issue would give away equity and may be an unpopular choice with existing shareholders, expected debenture interest is considered too high therefore selecting a fixed rate of interest bank loan so it is clear what the payments would be.. The report highlights the advantages and disadvantages of these methods and concludes each appraisal method has it failings and capital investment decisions are not straightforward and consideration should also be given to external drivers of risk. INTRODUCTIONThis report will consider the viability of investing in a newly developed technology that will help PLC Plc reduce costs, achieve efficiency and improve product quality. Financing the project will cost £1.2million and the financial preferences to fund the project are:• Share rights issue• Bank loan at current rate of 8%pa• Issue debentureExisting and potential investors have expressed a 10% rate of return on their capital investments.The payback period (PP) on this project is 5 years. This report will use three investment appraisal methods to analyse the viability of the project and present findings as to whether PLC should undertake the project or look for other opportunities.INVESTMENT APPRAISAL METHODSInvestments can involve large amounts of capital. According to Atrill and McLaney (2016, p.369) choices organisations make regarding investment can lead to disastrous results if miscalculations are made. Therefore appraising the project is financially realistic is key. Atrill and McLaney continue that after an investment is underway it is often problematic and costly to readdress any financial difficulties.The chosen investment appraisal methods for this project are: accounting rate of return (ARR), payback period (PP), and internal rate of return (IRR). Calculations can be found in Figure 1 and appendix a. Cash flow CumulativeCash Flow Discounted rate (8%) IRR