Global Business Project Appraisal and Financial Planning Assignment Sample

Business Economics & Finance In A Global Environment Assignment

1: Introduction

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In this assignment a detailed synopsis of the global business economics shall be conveyed thoroughly along with determining the relevant financial aspects existing in a global environment. The primary emphasis of this assignment shall be further provided for discussing the available budgeting approaches for a company to necessitate proper flow and management of financial records and expenses. In order to proceed with this assignment, necessary importance shall be further provided for discussing the investment appraisal techniques using the NPV, IRR, Payback and Discounted Payback methods. Subsequent numerical adherence and discussion on this assignment shall be weighed by considering the relevant and proposed income and expenditure budgets available for the company to consider. The company available for detailed analysis of this assignment is considered to be Clark Cask Logistics Plc (CCLP). Necessary recommendations shall also be offered to CCLP with regards to how finances could be monitored, whether investment in a new long-term project should be facilitated and selection of an appropriate budgeting approach.

2: Budgeting Approaches Available

The availability of budgeting approaches is considered to be a vital financial parameter for the company concerned CCLP for enhancing cost optimisation and long-term cost savings. As per explanations and illustrations of Schick (2018), the availability of budgeting approaches also ensures an organisation to cater market and industry pro longingness to enable durability and sustainability in the near and foreseeable future. Following is the detailed discussion of budgeting approaches available for the company concerned CCLP.

2.1: Rolling Budgeting

The primary budgeting approach that an organisation can facilitate is considered to be the rolling budgeting. As idealised and narrated by Ostaev et al. (2019), the main principle of employing rolling budgeting can be associated with updating the budget period on a rollover basis when the old or pre-existing budgeting period is completed. Hence, the feature or the principle of rollover aids an organisation to ensure that a particular budget is being used over a long time. Basic advantages attached with the application and implementation of the rolling budgeting can be considered as possessing a greater degree of flexibility in preparation. Thus, the preparation of rolling budgeting can aid the concerned managerial spearhead of CCLP to encourage and minimise essential operational costs over a prolonged period of time.

2.2: Activity Based Budgeting

In addition to the adherence to rolling budgeting, activity-based budgeting is also considered to be an important budgeting technique, which facilitates perpetual control and monitoring of financial resources for an organisation. As per illustrations and observations of Nikulina, Butyugina & Gorbunova (2019), the activity-based budgeting further regulates the way in which an organisation can control its finances and costs with respect to operational activities planned to be undertaken. Moreover, the activity-based budgeting is also considered to be a helpful tool as it necessitates cost allocations where maximum costs could be provided to products possessing a greater market demand. The application of this budgeting approach shall augur better financial aesthetics for CCLP to establish long-term profitability in the foreseeable future.

2.3: Top-Down Budgeting

In addition to the application of activity-based budgeting, the top-down budgeting approach can also be employed by organisations to facilitate proper cost planning and strategies (Wildavsky, 2018). The application of top-down budgeting by an organisation can be a complex yet fruitful one as involvement of all levels of an organisation is required to be followed. The budget is usually prepared by the top-level management of an organisation and it is further conveyed to all subordinates and existing levels of an organisation. The application of this budgeting approach shall also establish a higher degree of command and centralisation for CCLP to ensure reduction and obliteration of operational and ancillary costs.

2.4: Bottom Down Budgeting

Bottom-Down Budgeting is considered to be the fourth important budgeting approach where the relevant organisational body can also ensure harmonisation of cost savings in the near and distant future. Saguin (2019), expressed and viewed that bottom down budgeting can be considered as a polar opposite to the top-down budgeting where budgets are initially screened and prepared by the lower levels. Subsequent information and communication of the budget is then being relayed to the upper-level management of an organisation. The application of this budgeting approach shall further enable the management of CCLP to facilitate integrated budgeting preparation and presentation in a harmonised manner.

3: Investment Appraisal Techniques, Implementations and Computations

In order to facilitate the appropriate calculation of investment appraisal techniques, implementations and computations the following assumptions are being proposed.

• It is assumed that the cash outflows include costs of replacement, cost of heavy goods vehicle and the costs of building as well as consider the initial cash outflow with respect to acquisition costs involved in equipment
• Marginal Costing approach shall be subsequently followed with respect to adherence for variable costs, sales, fixed costs and their associated figures.
• It is expected that the entire project duration shall consist of a total duration span of 20 years.

Computation of Cash Outflow
Cost of Budling	£ 35,00,000.00
Cost of Heavy Goods vehicle	£ 1,20,000.00
Cost of Replacement for Other Vehicles	£ 24,000.00
Cost of Other Equipment	£ 2,28,000.00
Total Expected Cash Outflows	£ 38,72,000.00

According to the above table of cash outflow calculations for Clark Casc Plc. It can be considered that the calculation of expected cash outflows has considered the values of building costs, heavy goods vehicle, replacement costs of other vehicles and costs of other equipment. Following is the detailed synopsis of the computation of cash inflows for the company concerned CCLP.

Computation of Cash Inflows (000)
Particulars	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Total
Sales	£ 1,865.02	£ 1,942.73	£ 2,023.68	£ 2,108.00	£ 2,129.00	£ 2,156.00	£ 2,170.00	£ 2,190.00	£ 2,214.00	£ 2,324.70	£ 2,440.94	£ 2,562.98	£ 26,127.05
Variable Costs	£ 399.00	£ 402.00	£ 405.00	£ 407.00	£ 409.00	£ 412.00	£ 416.00	£ 400.00	£ 422.00	£ 423.00	£ 418.00	£ 417.00	£ 4,930.00
Contribution Margin	£ 1,466.02	£ 1,540.73	£ 1,618.68	£ 1,701.00	£ 1,720.00	£ 1,744.00	£ 1,754.00	£ 1,790.00	£ 1,792.00	£ 1,901.70	£ 2,022.94	£ 2,145.98	£ 21,197.05
Fixed Costs	£ 12,356.00	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 689.33	£ 19,938.67
Profits (Cash Inflows)	-£ 10,889.98	£ 851.40	£ 929.35	£ 1,011.67	£ 1,030.67	£ 1,054.67	£ 1,064.67	£ 1,100.67	£ 1,102.67	£ 1,212.37	£ 1,333.60	£ 1,456.65	£ 1,258.39

According to the above table of cash inflows calculation for Clark Casc Plc. It can be considered that the value of cash inflows or profits is considered to be GBP 1258.39 on an annual basis. The calculated value of cash inflow on an annual basis is considered to remain uniform for all twenty years of the project. Following is the detailed synopsis of the investment appraisal techniques using, NPV, IRR, Payback and Discounted Payback methods.

Calculation of Investment Appraisal (000)
Years	Cash Flows	Discounting Factor @ 9%	Discounted Cash flows	Cumulative Discounted Cash Flows	Cumulative Cash Flows
0	-£ 3,872.00	£ 1.00	-£ 3,872.00	-£ 3,872.00	-£ 3,872.00
1	£ 1,258.39	£ 0.90	£ 1,134.71	-£ 2,737.29	-£ 2,613.61
2	£ 1,258.39	£ 0.81	£ 1,023.18	-£ 1,714.11	-£ 1,355.22
3	£ 1,258.39	£ 0.73	£ 922.62	-£ 791.50	-£ 96.83
4	£ 1,258.39	£ 0.66	£ 831.93	£ 40.44	£ 1,161.56
5	£ 1,258.39	£ 0.60	£ 750.17	£ 790.60	£ 2,419.95
6	£ 1,258.39	£ 0.54	£ 676.43	£ 1,467.04	£ 3,678.34
7	£ 1,258.39	£ 0.48	£ 609.95	£ 2,076.99	£ 4,936.73
8	£ 1,258.39	£ 0.44	£ 550.00	£ 2,626.99	£ 6,195.12
9	£ 1,258.39	£ 0.39	£ 495.94	£ 3,122.93	£ 7,453.51
10	£ 1,258.39	£ 0.36	£ 447.20	£ 3,570.13	£ 8,711.90
11	£ 1,258.39	£ 0.32	£ 403.24	£ 3,973.37	£ 9,970.29
12	£ 1,258.39	£ 0.29	£ 363.61	£ 4,336.98	£ 11,228.68
13	£ 1,258.39	£ 0.26	£ 327.87	£ 4,664.86	£ 12,487.07
14	£ 1,258.39	£ 0.23	£ 295.65	£ 4,960.50	£ 13,745.46
15	£ 1,258.39	£ 0.21	£ 266.59	£ 5,227.09	£ 15,003.85
16	£ 1,258.39	£ 0.19	£ 240.39	£ 5,467.48	£ 16,262.24
17	£ 1,258.39	£ 0.17	£ 216.76	£ 5,684.24	£ 17,520.63
18	£ 1,258.39	£ 0.16	£ 195.46	£ 5,879.69	£ 18,779.02
19	£ 1,258.39	£ 0.14	£ 176.24	£ 6,055.94	£ 20,037.41
20	£ 1,258.39	£ 0.13	£ 158.92	£ 6,214.86	£ 21,295.80
Net Present Value	£ 6,214.86
Discounted Payback	4.03
Payback Period	4.92
Internal Rate of Return	32%
Average Rate of Return	32.50%

According to the above table of investment appraisal using, NPV, IRR, Payback and the discounted payback method, the net present value has been calculated as GBP 6214.86. Subsequently, the discounted payback period and the payback period have been calculated as 4.03 and 4.92 years respectively. Moreover, the Internal rate of return and the accounting rate of return has been calculated as 32% and 32.50% respectively. Hence, as per the detailed aesthetics of the project investment appraisal favourable measurements have been witnessed with regards to potential commencement and implementation of the project. Following is the detailed synopsis of the income and expenditure budgets prepared for Clark Cask Logistics Plc.

4: Proposed Income and Expenditure Budgets

Budget for the year ending April 30th 2023 of refrigerated goods division
SALES UNITS	Jan (£)	Feb (£)	Mar (£)	Apr (£)	May (£)	Jun (£)	Jul (£)	Aug (£)	Sep (£)	Oct (£)	Nov (£)	Dec (£)	TOTAL (£)
Total Sales Units	4417	4858.7	5344.57	5879.027	6466.9297	7113.62267	7824.984937	8607.483431	9468.231774	10415.05495	11456.56045	12602.21649
Sales value of per unit
Funds from Owners	1520
INCOME
Total Sales volume	2,20,850	2,42,935	2,67,229	2,93,951	3,23,346	3,55,681	3,91,249	4,30,374	4,73,412	5,20,753	5,72,828	6,30,111	47,22,719
Actual Income
Received Cash/Same Month 20%	44170	48587	53445.7	58790.27	64669.297	71136.2267	78249.84937	86074.83431	94682.31774	104150.5495	114565.6045	126022.1649	9,44,544
Received in 30 days 25%	55212.5	60733.75	66807.125	73487.8375	80836.62125	88920.28338	97812.31171	107593.5429	118352.8972	130188.1869	143207.0056	157527.7061	11,80,680
Received in 60 days 25%	55212.5	60733.75	66807.125	73487.8375	80836.62125	88920.28338	97812.31171	107593.5429	118352.8972	130188.1869	143207.0056	157527.7061	11,80,680
Received in 90 days	66255	72880.5	80168.55	88185.405	97003.9455	106704.3401	117374.7741	129112.2515	142023.4766	156225.8243	171848.4067	189033.2474	14,16,816
TOTAL INCOME	220850	242935	267228.5	293951.35	323346.485	355681.1335	391249.2469	430374.1715	473411.5887	520752.7476	572828.0223	630110.8245	47,22,719
Year to Date	66255	72880.5	80168.55	88185.405	97003.9455	106704.3401	117374.7741	129112.2515	142023.4766	156225.8243	171848.4067	189033.2474	14,16,816
Moving Monthly Average	102695.25	112964.775	124261.2525	136687.3778	150356.1155	165391.7271	181930.8998	200123.9898	220136.3887	242150.0276	266365.0304	897441.1079	28,00,504
COST OF SALES
Casual Staff	50	110	140	45	65	45	25	95	85	65	15	26	766
Fuel and Oil	150	155	165	145	154	178	142	126	129	124	145	195	1,808
Staff training cost	18.75	18.75	18.75	18.75	18.75	18.75	18.75	18.75	18.75	18.75	18.75	18.75	225
Administrative staff training cost	1375	1375	1375	1375	1375	1375	1375	1375	1375	1375	1375	1375	16,500
Gas and electricity supplies (fixed cost)	15000	15000	15000	15000	15000	15000	15000	15000	15000	15000	15000	15000	1,80,000
Depot operatives’	22.9	22.9	22.9	22.9	22.9	22.9	22.9	22.9	22.9	22.9	22.9	22.9	275
Sub-Total Cost of Sales	16617	16682	16722	16607	16636	16640	16584	16638	16631	16606	16577	16638	1,99,574
EXPENDITURE
Building maintenance	7000	7000	7000	7000	7000	7000	7000	7000	7000	7000	7000	7000	84,000
Vehicle maintenance cost	150	150	150	150	150	150	150	150	150	150	150	150	1,800
Building depreciation	4666.7	4666.7	4666.7	4666.7	4666.7	4666.7	4666.7	4666.7	4666.7	4666.7	4666.7	4666.7	56,000
vehicle insurance costs	200	200	200	200	200	200	200	200	200	200	200	200	2,400
other vehicles cost	6400	6400	6400	6400	6400	6400	6400	6400	6400	6400	6400	6400	76,800
average salary of operatives	153583	153583	153583	153583	153583	153583	153583	153583	153583	153583	153583	153583	18,43,000
drivers’ salary	2917	2917	2917	2917	2917	2917	2917	2917	2917	2917	2917	2917	35,000
Bonus of staff	768	768	768	768	768	768	768	768	768	768	768	768	9,215
TOTAL EXPENSES	175685	175685	175685	175685	175685	175685	175685	175685	175685	175685	175685	175685	21,08,215
CASH SURPLUS/DEFICIT	28548.75	50569	74822	101660	131026	163357	198981	238052	281096	328462	380567	437789	24,14,930

The culminating value of profitability achieved by consideration of total cost of sales and revenues is thus considered to be GBP 21,08,125. Khalifa, & Scarparo (2021) narrated and idealised that business projections, usually deploy a significant importance on the business expansion avenues, which is usually substantiated based on lower and optimised costs and prospects of high revenue generating attributes. Moreover, the concerned managerial spearhead of CCLP is also required to keep leeway for making amendments in the budget for suiting best and plausible organisational aesthetics and dynamics. Financial crises are also needed to be considered by the concerned management of CCLP for mitigating potential financial risks in the near and foreseeable future.

5: Conclusion

In this assignment, a detailed synopsis of budgeting approaches has been covered wit respect to activity based, top and bottom down and rolling budgeting. Further importance has been provided on determining the capital budgeting or investment appraisal techniques, which consists of NPV, IRR, Payback and discounted payback methods where favourable propositions have been witnessed. Subsequently, the computation of expenditure and income budget for refrigerated goods division has been conducted where cash surpluses have been established in abundance. Adherence to future risks and making necessary amendments is also needed to be considered by the management of CCLP for ensuring better financial aesthetics in the near and foreseeable future.

6: Recommendations

R1: It is recommended to Identify Cost Monitoring Prospects

The primary recommendation proposed to CCLP consists of identification of cost monitoring prospects. The identification of cost monitoring prospects shall further enable the organisation to determine where costs could be saved and what necessary activities could be conducted that would lead to high turnover generation.

R2: It is recommended to choose Activity-based optimise costs

The second recommendation proposed to the concerned management of CCLP is considered to be related with choosing activity-based budgeting approaches for optimising costs. The selection of activity budgeting shall enable the company to locate potential high demanded products and allocate costs accordingly. Moreover, the production planning phase for low demanded products can be minimised for saving costs and other operational resources.

R3: It is recommended to employ strategic planning for establishing higher accord in future operations.

The employment for strategic planning for achieving higher accord in future operations is mostly considered to be in line as per the investment appraisal criteria. As the NPV is positive, it is recommended to select the project and establish credible future operational planning to nullify spillage of costs. Hence, it is recommended that the new project being appraised and calculated is needed to be selected as it contains the prospects of higher future revenue generation.

References

• Khalifa, R., & Scarparo, S. (2021). Gender Responsive Budgeting: A tool for gender equality. Critical Perspectives on Accounting, 79, 102183. https://doi.org/10.1016/j.cpa.2020.102183
• Nikulina, S. N., Butyugina, A. A., & Gorbunova, E. E. (2019, October). Investment activity in conditions of automation use of budgeting system. In IOP Conference Series: Earth and Environmental Science (Vol. 341, No. 1, p. 012217). IOP Publishing. doi:10.1088/1755-1315/341/1/012217
• Ostaev, G. Y., Gogolev, I. M., Kondratiev, D. V., Markovina, E. V., Mironova, M. V., Kravchenko, N. A., & Aleksandrova, E. V. (2019). Strategic budgeting in the accounting and management system of agricultural enterprises. Indo American Journal of Pharmaceutical Sciences, 6(4), 8180-8186. https://elibrary.ru/item.asp?id=37284415
• Saguin, K. (2018). Why the poor do not benefit from community-driven development: Lessons from participatory budgeting. World Development, 112, 220-232. https://doi.org/10.1016/j.worlddev.2018.08.009
• Schick, A. (2018). Budgeting for results: recent developments in five industrialized countries. Performance-based budgeting, 129-146. https://www.taylorfrancis.com/chapters/edit/10.4324/9780429498411-9/budgeting-results-recent-developments-five-industrialized-countries-allen-schick
• Wildavsky, A. (2018). Budgeting as a political process. In The Revolt Against the Masses (pp. 338-349). Routledge. https://www.taylorfrancis.com/chapters/edit/10.4324/9781351302920-19/budgeting-political-process-aaron-wildavsky