Merseyside Project, Research Paper Example

It is essential for the cost of efficiency and design studies to be included in the financial projections. The cost must be included for accountability purposes and for future operations. Inclusion of the cost of efficiency and renovation also makes forecasting in terms of preparation of financial statements easier.

Even though the project is mainly based on renovation and increases the production by 7%. The value of capital fluctuates from time to time due to inflation and to attain the face value of capital at a certain moment the inflation rate must be included in the overheads. It is important to include the overheads that are on a 3.5% basis as this is essential for budgeting and how much the project will charge for its products in order for it to make a profit.

Costs are an important aspect of a project. All the material that are required in a project have to be bought hence the inclusion of costs and hence helps in proper estimations and planning. When setting, or planning a project it is important to account for all the costs whether they were abrupt or planned for, this aids in budgeting and also when seeking for investors and financial partners as it is easy to explain and access the credibility of the project.

Cannibalization is a scenario where a new product is introduced into the market of which causes a decrease in the sales of the existing products. As a result of the explanation above Greystock is correct in his statement that cannibalization is not really a cashflow. This is because a loss in sales from product cannibalization is mainly used in analysis of whether the new product should be introduced in the market or not. The cash analysis brings about the possibility of the new product being rejected of which could result to a competitor taking advantage.

I agree with griffins, including the initial investments as it helps in projecting risks and the potential profits that might be involved in the project. Initial investment is the basis on which a project is founded or rather it is what kick starts the project hence not including it might lead to a big failure as it also acts as a projection of a project.

The projection of the revenues, expenses and cashflows as it is always appropriate to value projections using the current economic value is it gives an organization a true estimate of the cashflows in their projections.

The project is viable thus is acceptable. Yes, I would accept the project. Calculations are on the excel sheet agreed projections for the base case are:

Based on the above projections Victoria chemicals should accept the project as in all scenarios the calculations of the NPV, IRR, MIRR, Profitability index and payback period on the table are consistent and hence if any is altered it does not have a negative impact on the cashflow predictions.