OF CONTENTS V
1.0 INTRODUCTION 1
OF THE PROBLEM 2
OF THE STUDY 3
OF THE STUDY 4
OF THE STUDY 4
OF THE STUDY 5
OF THE TERMINOLOGY 6
2.1 INTRODUCTION 16
EVALUATION DECISION 22
CAPITAL EXPENDITURE DECISION 23
SELECTION OF RELEVANT DATA FOR DECISION MAKING 24
USING COSTING DECISION MAKING
COMPREHENSIVE INCOME APPROACH
DIFFERENTIAL ANALYSIS APPROACH
FINANCIAL ACCOUNTING 26
2.4 IDENTIFY RELEVANT DATA FOR SPECIAL DECISION 26
A NEW EQUIPMENT 27
3.0 INTRODUCTION 38
BACKGROUND OF THE STUDY 40
OF GETTING DATA (PRIMARY AND SECONDARY) 42
DATA PRESENTATION ANALYSIS AND INTERPRETATION 45
4.1 INTRODUCTION 45
4.2 CAPITAL BUDGETING DECISION 46
4.3 SCREENING TESTS 48
4.4 THE NET PRESENT VALUE METHOD 48
4.5 CALCULATION OF IRR BY LINEAR INTERPRETATION 54
CONCLUSION AND RECOMMENDATION
OF FINDING 56
5.1 CONCLUSION 57
5.2 RECOMMENDATION 58
OF THE STUDY 59
Capital investment decision is a
business entity is a function of the top management in an organization the
taking of decision to in primary is predetermination of organization goal and
constant evaluation of the feasible strategies used for attainment of goals and
objective. This decision involves the commitments of capital into investment or
projects that have long term span, or allocation of capital to long term asset,
that would yield benefit in the future. Due to
the fact that future benefits are uncertain, investment decision involve
risk and uncertainty. Therefore investment proposals should be evaluated in
terms of both return or profit and risk, these two factors affect the firm’s
The process of planning and managing a
firm’s long term investment is referred to as capital budgeting, which would be
treated later in this book. One of the function of the financial manager is to
evaluation the expected cash inflows, that is cash expected to receive from
investment when the cash is expected (the time )and compare it with expected
cash outflow, that is expenditure on the investment. Also the financial manager
is expected to evaluate the size, timing and risk of future cash flows before
the final selection of investment/ projects.
This Procedure involves the lower
management level whose const functions is to evaluate project to provide profitable
in formations which forms the basis for judgment by the top management in under
taking their function in progressive circle of planning evaluation and control
of investment proposals for the attainment of organization goals.
OF THE PROBLEMS
is faced with a lot of problem in it’s capital investment decision making such
to make or buy decision
to purchase a new machine or replace the old
to introduce a new product or to cancel the
formal product line
whether to sell off or process farther
on a special order e.t.c
there exist many alternative course of action or techniques managers are
expected to evaluate and use the various available strategies in order to get
most profitable alternative.
Also managers are faced with such
implementation problem such as:
i Determination of adequate amount of
capital expenditure for each project work
ii The control needed to meet up the product
iii The control required to meet the target time
OF THE STUDY
out such function managers are faced with risk and consequently to meet the
required production standard and loss of profit.
to achieve such organization goal head to liability to stand amongst industrial
competition and consequently to short down the industry.
There fore, the aims of this research
work is to look at strategies and criteria adopted by global soap and detergent
manufacturing company which have resulted into their success or failure and to
make reach in to writer text to enable researcher recommend profitable
techniques for selecting investment implementation.
this research works, the each have explained and example the techniques for
selecting relevant data for
proposal and evaluate of controls adopted by Global manufacturing company and
recommendation of writers of textbook and class lectures are also explained in
OF THE STUDY
topic chose for this research work is vast the researcher in much interested in this
project topic to enable him to look in to the causes of success and failure of
present system in business entities
a vigorous resource work has to be undertaken to enable the researcher achieve predetermined
Moreover, Global soap manufacturing
company are of the surviving business entities in this action data necessary
for the study. Information and data necessary for the purpose of this destination.
This has tremendously economized the
scare resource of time and money with the effort to audit the
investment affairs and managerial decision function to the company.
OF THE STUDY
research study is restricted to Global manufacturing company of Asa Dam
State. Another laminating
factors is the time allowed to complete and submitted factors is the time
allowed to complete and submitted the project work. The time is so short that
some aspect of the research study can not be covered.
Also money plays a crucial role in
limiting the scope of this project. The research finds the economic enrolment
hard to clear with that he can not extend up exception. The research has
covered such a wide area in the aspect of selecting relevant data for project
evaluation and used for time value of money factored for acceptance of
1.5 RESEARCH METHODOLGY
this study information was collected both from primary and secondary sources.
The primary source of this study are responses of questionnaire send to
respondent selected from the manufacturing comparing and same causes the
personnel interview conducted.
secondary data used magazine, school journals, relevant text books material
from university of ilorin library and kwara state polytechnic ilorin
OF THE STUDY
research work has been such divided in to the following chapter one will
contain the introduction of the study, statement of the problem, objective of
the study, important of the study, and finally determination of the
Chapter two will contain literature
review and reference chapter three will also contain historical background of
method of gathering data (primary & secondary data)method of data analysis.
Chapter four will contain data
presentation analysis and interpretation. Chapter five will also contain the
summary of the study conclusion, recommendation and limitation of the study.
Accounting rate of return area:- is a
measure used to evaluate investment proposal that is computed by chiding
accounting net income for a project (revenue minus cost including depreciation
and income taxes ) by the average net environment in the project it is also
called simple rate of return.
AUDIT OF CAPITAL BUDGETING PROJECT:-
The following up practice of company the
actual result of an investment project with its expected result. It used for
control purpose and decision in making during the
life line when modification may be indicated cost of capital.
The combined weighted average rate of
cost that is firm incomes on its long term preferred stock and common stock.
The planning and financing of long
investment such as buying equipment and introducing new products.
CUT OFF RATE:-
The minimum rate of return an investment
must propose before a firm will commit its resource to the investment. Also
called the handle rate or target rate of return.
The investment used to find the present
value of a future cash flow.
DISCOUNT CASH FLOW MODEL:-
This is the techniques used to evaluate
investment project that applied the time value of money to all cash flow and
out flows by discounting them to their present values. The most two commonly
use discount cash flow model are the net present value (NPV) method and the
internal rate of return (IRR) method.
HARD DATE :-
These are the information that may be
ascertain with high degree of precious and for which uncertainty is either
small or non existent.
INTERNAL RATE OF RETURN
Is the rate of interest that produces a
zero net present value when a projects discount cash operation advantage is not
against discounted net investment.
This is a proportion (fraction)
calculation made to estimate of project internal rate of return when present
value factors falls between two figures shows in the present value table.
NET PRESENT VALUE METHOD :-
Is the amount available after
subtracting the discount net investment from discount cash. If the amount is
positive the investment proposes more than the discounted rate use to evaluate
and the proposal. If the amount is negative the reserve is return and the
project should be rejected.
NET PRESENT VALUE METHOD:-
Is the amount available after
subtracting the discounted investment from discount cash. If the amount is
positive the investment promises more that the discounted rate use to calculate
and the proposal. If the
is negative is return and the project should be rejected.
PAYBACK PERIOD :-
The second phase of capital budgeting in
which the investment that have surviving the screening process are subject to
ranking criterion with result in the election of the most factorable projects
for given amount of capital to be invested.
The ratio obtained by dividing
investment discount cash inflows by the required net investment. The competing
project may be ranked by their probability index. The higher the profitability
index the more desirable the project.
The initial phase of capital budgeting
in which a specific cut – off criterion in used to eliminate unprofitable or
high risk invest proposal.
CASH OPERATING ADVANTAGE
The cash effect of the different in cash
operating cost as a result of contemplated change in a firms operation in which
the net operating income for each alternative is computed and compared. All
revenue and cost are considered even those that are the same for each
COMPETITORS BASE PRICING
Pricing product to compete with a
competitions price and their assessing whether or non the product can be
manufacture of the cost that will yield a satisfactory profit.
A limiting factor such as available
machine hours available direct hours, or available direct labor hours.
A form of mark up principle which a predetermine
percentage of a product cost is include in it selling price to cover the
sellers operating cost income taxes and a reasonable period.
DEMAND ORIENTED PRICING:-
product by using a higher price when demand is high and lower price whom demand
Method of assessing the effect on point
of contemplated in operations only revenue and cost that differ among the
alternatives are considered.
Cost that do not affect the decision to
be made such as sunk cost that are the some for each alternative under
JOINT PRODUCT COST:-
This is the cost of accounting and
processing a single raw materials up to the split off the joint product.
MARKET PENETRATION PRICING:-
Setting the initial price of a new
product low enough to immediately captive a care share of the market
MAKE UP PRICING:-
The inclusion of a pie determined
percentage in a products price to cover the sellers operating cost income and
taxes and reasonable profit. The markup percentage may be4 on either the items
cost or its final selling price
There are costs that differ among
alternative and will influence the outcome of the decision making process.
The cost that is incurred when
processing of joint project after the split off point.
This is the setting of price of a
product high enough to get a small share of the market initially and than
lowering the price to tract more customer for a longer share of the market.
SLIPT OFF POINT:-
The stage in the production process at
which joint changed by any future action
TARGET RETURN PRICING:-
This is the method of setting the price
of a product so that a pre-determined amount will be earned an investment.
Is the information obtained by comparing
actual results to pre-determined plains.
A specific statement of the aim toward
which a company intends to direct it effects.
The entire pattern of a company’s basic
mission purpose, objective polices and specific resources development
The combine and arranging of human material resource in a system of activities
that will attain desired goals.
Dealing what objectives to purse during
a future time period and what to do in order to achieve those objectives.
Directing and channeling human behavior
toward the accomplishment of company’s goals.
PLANNING AND CONTROL CIRCLE:-
the continuous loop of planning, using feedback to evaluate result, taking
corrective actions, if necessary and returning to the planning stage. The
planning provides the mechanism by which plan is revised if necessary for the
SHORT TERM PLANNING:-
A short term planning decision making
process that include setting objectives that are consistent with long term
goals and selecting means of which he objectives will be altered.
The process of securing and developing
personal for the jobs that are created during organized process.
A long term decision marking process
that includes setting the means by which goals will be at tamed.
The method use to purse goals.
Is the financial office of a firm whose
duties include custodian ship of the company’s hands, banking arranging
stoke hold relations insurance coverage and extension of credits.
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