Part B 5 Matteck pic is now considering expanding into Asia. This operation would involve the acquisition of a factory, the purchase of several new motor vehicles and a new distribution unit. The following are the estimated costs of the planned investment: Description Cost Factory £1,100,000 Motor Vehicles £500,000 Distribution Unit £900,000 The Directors have calculated that the expected revenue from the investment over the next five years is as follows: Year 1 2 3 £500,000 £600,000 £700,000 £750,000 £750,000 The company has advised you that any projects chosen should have an accounting rate of return of at least 15% and Matteck's cost of capital is 10%. It is also keen to recover the cost of the investment within four years. You are required to: Produce a report for management in which you evaluate the financial viability of the above Investment proposal Your report should include: The evaluation of the project using either the payback period or the accounting rate of return method. (ii) a discounted cash flow (net present value or internal rate of return) which includes all relevant data allocated to the correct periods (i) An assessment of the viability of the project making reference to a minimum of three conclusions and recommendations - these must be supported with evidence from your analysis of the investment appraisal techniques, you should also consider any non financial factors when making your recommendations Note: For the purpose of this task you should ignore the impact of taxation and inflation on the above figures. The present value factors are given on the following page.

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