Gareth has asked you to produce a formal report for the Board of Directors at PNJ Ltd about this
investment project that appraises each investment option (using discounted and non-discounted
techniques) and gives a justified recommendation for the preferred choice.
He has also asked you to comment on the risks involved in this project and possible sources of funding
for it, as crowdfunding has been mentioned as a possible way forward by some of the Board members.
Gareth has told you that the company can borrow at 8%, but that the company accounts (extract
below) could be used to work out a different discount rate. This would need to be explained and
justified in your report.
Your report should include:
1. An explanation of each of the following capital investment appraisal techniques:
a. Pay Back (PB)
b. Internal Rate of Return (IRR)
c. Net Present Value (NPV)
d. Accounting Rate of Return (ARR)
2. Calculate the four investment options using the above capital investment appraisal techniques.
Appraise the results and include an explanation of which discount rate was used and why.
3. An outline of the potential risks involved with this project, and an explanation of their likely
impact.
4. A summary of possible sources of funding for the project, outlining the advantages and
disadvantages of each.
5. A fully justified recommendation for one of the investment options.
6. Full calculations for the capital investment appraisals included as an appendix.
PNJ Ltd – Extract from the accounts 2018 (all figs in £m)
Net fixed assets 250
Current assets 126
Long term liabilities 180
Current liabilities 166
Profit before tax and interest 3
