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Introduction of Accounting And Finance at Amcor PLC For Investment Decision-Making Assignment
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The motive of the proposed investment
A. Purpose of investment
The company has expected to get growth by USD 5.78 billion according to Technavio (Bloomberg, 2022). Due to the covid pandemic significantly market has slop down inverse to the growth in the first half of 2020. The ecological damage has occurred by the huge use of plastics and packaging materials. Therefore, the government has restricted the use of polymers and plastics. It may show the problem in the supply of the packaging product. At the month-end of June 2020, the volume becomes 1% increased within both segments of the flexibility and the rigid packaging (Bloomberg, 2022). This may reflect on the Armor's board of the geographic and the diversion of the market.
It become very important to resolve the problem as the covid-19 pandemic has created an increment in the demand for products of “Fast-Moving Consumer Goods (FMCG).” Indirectly it may impact the hygiene in the home and personal packed food. The company also provides medical devices and healthcare products in the market which may provide sustainability during pandemics.
B. Process of investment
The problem may be caused in the stage of the operation that was launched by Amcor plc during a pandemic. The operation related to the mitigation of the impact of covid-19 donating the product to healthcare (Annualreports, 2022). The supply chain of the product may reflect on every Amcor plant and the office to the continuity of the business. The problem may be resolved by keeping supporting the business partners through the various investments and employees' health. The company has faced the risk of the foreign exchange rate and the changes in the rules of the government’s regulation toward the environment and the safety matters.
C. Proposition of investment
Amcor has been connected to the responsibility of the packaging that has become the first global packaging company pledging to the development by recycling the reusables (Annualreports, 2022). The company has high requirements for the innovation of the capacity and the collaboration with the customers, innovators, and suppliers. It may require a more sustainable or eco-friendly packaging process by sporting and recycling the wastages.
The laws and the regulation has discharged the issues for the supplies of the materials. Therefore the cost of the material and the other expenses has become larger and larger. The compliances to the sustainable applicability of the environmental laws and regulations may create issues in the auditing process of the management (Annualreports, 2022). Furthermore, the company has decided to invest 75 million GBP of equity and 75 million GBP of debts in the market. The total amount has become 150 million GBP that decide to invest in the market for the purpos of the issues. The requirement of the consumer for a cost-effective and convenient that easy to pack that may reduce the wastage may not be fulfilled due to the absence of the supplies.
Conduct investment appraisal using both quantitative and qualitative information
A. Conduct a Payback period
The payback period helps to analyze the time period taken by the company for the investment. This type of method may provide the opportunity for investment and making decisions on a project for the return on investment (Zhang et al. 2021). The payback period has becom 5 years 5 months after the calculation.
(Refer to Appendix 2)
B. Net Present Value (NPV) and Internal Rate of Return (IRR)
Net present value has been used for the calculation of total current values for future payments in the ways of investments. IRR is the method for the analysis of the financial statement to estimate the profitability of the potential investment (Karajovi?, 2021). The value of the NPV has 107% and IRR is 24% of the period in return of investment. These data indicated that project will be profitable.
(Refer to Appendix 1 and 3)
C. SWOT and PESTEL
SWOT Analysis
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Strength
? Enable the leverage across the portfolio (amcor.com, 2022)
? Unique combination
? Best protected environment
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Weakness
? Multiple paths of supply (amcor.com, 2022)
? Pursuing target acquisition
? Health of environment
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Opportunities
? Recycling of wastage
? Good demand for healthcare packaging (amcor.com, 2022)
? Initiatives with procurement and footprints
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Threats
? Rules and regulation of the government
? Cost synergies
? Cost and expenses
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Table 1: SWOT Analysis
Source:
Strength
Amcor plc has the various way to describes the capacities of the deployment across the enable to get the leverage of the portfolio strong business. The company has various ways to attend to the competitive market and position (Benzaghta et al. 2021). They have a unique way for the production system of the packaging by applying the values of the consumer.
Weakness
There may be various types of weakness has been occurring with the application of the criteria. The main target of the company was during these COVID to sustain the health of the environment (amcor.com, 2022). Therefore, the supplies of the material may have face a reduction in the process.
Opportunities
There may be various numbers of opportunities for the company in the way of the requirement of the supply chain. The health packaging has effective demand in market (Longhurst et al. 2020). The initiatives of the procurement and footprints may protect the brands of the packaging.
Threats
The application of the production method may be facing the threat in the area of the Rules and regulations held by the government due to covid and environmental policy (Wang and Wang, 2020). Therefore, the government may affect in the area of synergies of the various cost and expenses.
PESTEL Analysis
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P
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E
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S
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T
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E
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L
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Political
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Economic
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Social
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Technological
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Environmental
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Legal
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? Government policy
? Foreign trade policy
? Trade reduction
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? Interest rate
? Inflation rate
? Economic growth
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? Safety
? Health
? Polation growth rate
? Age differences
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? Innovation level
? Technological changes
? automation
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? Environmental policiies
? Climate change
? presurre
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? Laws
? Consumer protection laws
? Health and safety laws
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Table 2: PESTEL Analysis
Source:
Political
There may be various types of the policies, which can be affecting the business of company (Pan et al. 2019). Foreign trade may increase the cost of the management and the supply chain of the products. The government policy of UK has strictly applicable; therefore, the company may plan its future business securely (Eacea.ec.europa.eu, 2022).
Economic
The Interest rate has become very low for the covid that shows the disagreement of the investment (Sigcha et al. 2020). The Inflation rate has also another reason for the reduction of the supply chain (Eacea.ec.europa.eu, 2022).
Social
The Safety of the workers and the way of the supply of the material may become a vital part of the way of the investment (Pan et al. 2019). The Population growth rate may face the varieties of the requirement for the packaging.
Technological
The innovation of the new technology may increase the low work performance of the workers due to the less knowledge of the technology and the process of automation (Britanica.com, 2022).
Environmental
Sustainability may inform every aspect of the activity of Amcor plc from the way of the Environmental policies. Climate changes may minimize water uses or the cutting down the wastages.
Legal
The different Laws applied on the business may face the issues of the supply of the chain. The Consumer protection laws and Health and safety laws may be taken for the good performance of the company.
Critically discussion on the risk and return and their potential impact on the financial performance
A. Conduct a Sensitivity analysis for the risk and return
Amcor plc may require for the comply with the reporting obligations on the basis of the financial statement. The sensitivity of the analysis may show the low adoption of the material. Therefore the investment related to the risk may be low as the NPV has 160.92 million GBP.
(Refer to Appendix 6)
B. Risk variables: Cost of capital, Cost, and Benefits
The cost of capital on the investment of the equity and debts has become 4.095 has the risk-free rate 5.60%. Therefore, the company has a corporation tax rate of 19.00% that the company may face a low risk of the investment. The company may get a high level of benefits as the company is expected to get a good level of return.
(Refer to Appendix 5)
C. Return on NPV
The equity and the debt investment have the NPV return on the basis of the rate of the market. The value of the NPV has occurred 107% of the investment of the return.
(Refer to Appendix 1)
D. Discussion on various risks and returns of investments and Discounted Payback Period
The interest rate can increase the cost of borrowing those results in the operation of the investment (Gorshkov et al. 2018). The discount payback period has the return of the investment has occurred 6 years and 4 months. Therefore, the recovery of the investment has good in the position, it shows that the company may invest in the share and debts.
(Refer to Appendix 4)
E. Discussion on the impacts of risk and return on the company’s financial performance
The financial statement shows that Amcor plc has a deficiency of the materials weakness and required internal control over the financial report. The company may be required for providing the reasonable assurance of the transaction that may necessary for permission. The calculation of the WACC has an income rate of 19% and the total equity cost has 4.15% at the same time risk free rate has occurred 5.06%. It show that the decision of the investment of the company has good for the overcome of COVID-19 losses.
References
Amcor.com, 2022 Helping Brands GrowAvailable at:https://www.amcor.com/about/solutions/flexible-packaging[Accessed on 7th May, 2022]
Amcor.com, 2022 Being Amcor | Winning AspirationAvailable at:https://www.amcor.com/about/overview/being-amcor[Accessed on 7th May, 2022]
Amcor.com, 2022 Protecting people, delivering vital packaging, contributing to communities Available at:https://www.amcor.com/about/overview/covid-19-response[Accessed on 7th May, 2022]
Amcor.com, 2022 Innovation in packagingAvailable at:https://www.amcor.com/about/overview/innovation[Accessed on 7th May, 2022]
Britannica.com, 2022 Political, Social and Economic Background and Trends Available at:https://www.britannica.com/place/United-Kingdom/Social-economic-and-cultural-change[Accessed on 7th May, 2022]
Eacea.ec.europa.eu, 2022 Social, economic, and cultural changeAvailable at:https://eacea.ec.europa.eu/national-policies/eurydice/content/political-social-and-economic-background-and-trends-93_en[Accessed on 7th May, 2022]
Annualreports, (2022), 2020 Annual Report, 2020, Available at:https://www.annualreports.com/HostedData/AnnualReports/PDF/OTC_AMCRF_2020.pdf [Accessed on 7th May, 2022]
Benzaghta, M.A., Elwalda, A., Mousa, M.M., Erkan, I. and Rahman, M., 2021. SWOT analysis applications: An integrative literature review. Journal of Global Business Insights, 6(1), pp.55-73.
Bloomberg, (2022), Analysis on Impact of COVID-19- Bioplastic Packaging Market 2020-2024 Evolving Opportunities with Amcor Plc and BioPak Pty, September 8, 2020, Available at: https://www.bloomberg.com/press-releases/2020-09-08/analysis-on-impact-of-covid-19-bioplastic-packaging-market-2020-2024-evolving-opportunities-with-amcor-plc-and-biopak-pty [Accessed on 7th May, 2022]
Globaldata, (2022), Amcor Plc: Overview, 2022, Available at: https://www.globaldata.com/company-profile/amcor-plc/ [Accessed on 7th May, 2022]
Gorshkov, A.S., Vatin, N.I., Rymkevich, P.P. and Kydrevich, O.O., 2018. Payback period of investments in energy saving. Magazine of Civil Engineering, (2).
Karajovi?, M., 2021. CONFLICT BETWEEN NET PRESENT VALUE AND INTERNAL RATE OF RETURN METHODS. International Journal of Economics & Law, 11(33), pp.187-195.
Longhurst, G.J., Stone, D.M., Dulohery, K., Scully, D., Campbell, T. and Smith, C.F., 2020. Strength, weakness, opportunity, threat (SWOT) analysis of the adaptations to anatomical education in the United Kingdom and Republic of Ireland in response to the Covid?19 pandemic. Anatomical sciences education, 13(3), pp.301-311.
Pan, W., Chen, L. and Zhan, W., 2019. PESTEL analysis of construction productivity enhancement strategies: A case study of three economies. Journal of Management in Engineering, 35(1), p.05018013.
Sigcha, E., Martinez-Moscoso, A., Siguenza-Guzman, L. and Jadan, D., 2020, July. PESTEL Analysis as a Baseline to Support Decision-Making in the Local Textile Industry. In International Conference on Systems and Information Sciences (pp. 144-156). Springer, Cham.
Wang, J. and Wang, Z., 2020. Strengths, weaknesses, opportunities and threats (Swot) analysis of china’s prevention and control strategy for the covid-19 epidemic. International Journal of Environmental Research and Public Health, 17(7), p.2235.
Zhang, C., Hu, M., Laclau, B., Garnesson, T., Yang, X. and Tukker, A., 2021. Energy-carbon-investment payback analysis of prefabricated envelope-cladding system for building energy renovation: Cases in Spain, the Netherlands, and Sweden. Renewable and Sustainable Energy Reviews, 145, p.111077.
