Using the financial data given below you are required to prepare appropriate investment appraisal analysis to assess the viability of the investment.

As part of their discussions, Megan and Phil have budgeted for the following increased marketing budget (in money terms): - Year 1 2 3 Expenditure 15,000 17,000 18,000 E18,500 Key Financial Data SLF Ltd is intending to invest in new capital equipment and premises to undertake the planned expansion into the Southwest of England. Having undertaken some market research, Megan has provided the following financial information to the team at One Accountancy, The cost of the new equipment will be 350,000 and is expected to last for four years. The residual value of the equipment at the end of the investment period will be 50,000 (in money terms). These initial capital costs are for vans, vehicles, digging machinery and tree felling equipment. The additional storage and warehousing space (i.e., the premises) will be rented and the rental costs are included in the fixed costs below. Megan has worked with Phil regarding the potential business opportunity, and they have predicted the following increased sales volumes. These volumes represent the increased number of jobs that they will be able to complete, given the expansion. Incremental volumes in completed jobs over the next 4 years are as follows: Additional transportation costs associated with the project are as follows:- Year 1 2 3 4 % % of sales revenue 1% 1.2% 1.4% 1.4% The working capital requirements associated with the project are (in money terms): - Year 1 1 2 3 3 4 Year 1 2 2 3 4 Expenditure 15,000 18,000 22,000 24,000 Additional volumes (No. of jobs) 360 385 405 410 Other market research costs already incurred on the project have amounted to 17,000. SLF Ltd pays corporation tax at the rate of 18% and there is a one-year delay on paying tax. Capital allowances can be claimed at 25% on a reducing balance basis. Based on their current selling prices and after undertaking market research, the average price for a job has been ascertained as 1,450.00 per job and the average variable cost of completing each job has been estimated at 950.00 per job. Annual incremental fixed production overheads ds are expected to be 40,000 per annum, as a result of the decision to undertake the expansion. The prices, variable costs and fixed costs are in real terms. . KPIs - Key Performance Indicators As part of discussions with Megan and Phil, the team at One Accountancy have advised upon and agreed the following KPIs: Payback Period Less than 3 years Target Accounting Rate of Return (ARR) 22% Prices, variable costs and fixed costs are expected to increase due to inflation as follows:- Average price per job 2.00% per annum Average variable cost per job 3.00% per annum Fixed costs and overheads 5.00% per annum NPV Must meet general decision rules Must meet general decision rules IRR The business advisory team at One Accountancy ascertained the following information for the cost of capital: : Real cost of capital 5.00% General Inflation 1.90% As part of their discussions, Megan and Phil have budgeted for the following increased marketing budget (in money terms): - Year 1 2 3 Expenditure 15,000 17,000 18,000 E18,500 Key Financial Data SLF Ltd is intending to invest in new capital equipment and premises to undertake the planned expansion into the Southwest of England. Having undertaken some market research, Megan has provided the following financial information to the team at One Accountancy, The cost of the new equipment will be 350,000 and is expected to last for four years. The residual value of the equipment at the end of the investment period will be 50,000 (in money terms). These initial capital costs are for vans, vehicles, digging machinery and tree felling equipment. The additional storage and warehousing space (i.e., the premises) will be rented and the rental costs are included in the fixed costs below. Megan has worked with Phil regarding the potential business opportunity, and they have predicted the following increased sales volumes. These volumes represent the increased number of jobs that they will be able to complete, given the expansion. Incremental volumes in completed jobs over the next 4 years are as follows: Additional transportation costs associated with the project are as follows:- Year 1 2 3 4 % % of sales revenue 1% 1.2% 1.4% 1.4% The working capital requirements associated with the project are (in money terms): - Year 1 1 2 3 3 4 Year 1 2 2 3 4 Expenditure 15,000 18,000 22,000 24,000 Additional volumes (No. of jobs) 360 385 405 410 Other market research costs already incurred on the project have amounted to 17,000. SLF Ltd pays corporation tax at the rate of 18% and there is a one-year delay on paying tax. Capital allowances can be claimed at 25% on a reducing balance basis. Based on their current selling prices and after undertaking market research, the average price for a job has been ascertained as 1,450.00 per job and the average variable cost of completing each job has been estimated at 950.00 per job. Annual incremental fixed production overheads ds are expected to be 40,000 per annum, as a result of the decision to undertake the expansion. The prices, variable costs and fixed costs are in real terms. . KPIs - Key Performance Indicators As part of discussions with Megan and Phil, the team at One Accountancy have advised upon and agreed the following KPIs: Payback Period Less than 3 years Target Accounting Rate of Return (ARR) 22% Prices, variable costs and fixed costs are expected to increase due to inflation as follows:- Average price per job 2.00% per annum Average variable cost per job 3.00% per annum Fixed costs and overheads 5.00% per annum NPV Must meet general decision rules Must meet general decision rules IRR The business advisory team at One Accountancy ascertained the following information for the cost of capital: : Real cost of capital 5.00% General Inflation 1.90%