The analysis by Steel Tube division of Engineering Products Plc Assignment

The abridgment by Steel tube-shaped structure division of Engineering Products Plc accountant - Assignment ExampleCenter of discussion in this paper is a monetary analyst for Steel Tube division of Engineering Products Plc named Roger Davis. He is having a tough while convincing the management for a lying-in proposal. The analysis by his accountant and the additional information obtained from otherwise sources has added to his woes. Roger Davis needs to convince his managing director about the viability of a new proposal for computer numerically controlled (CNC) mill around machine. The MD is not ready to spend money on the project unless it can start gentle profits within 3 socio-economic classs. However, the accountants analysis shows an everyplaceall loss for the project over the next 4 years. It wont be prudent to expect much from the project afterwards this period. Roger has collected a lot of additional information as well. But he has not been commensurate to justif y the viability of the project with given information. Most of the information available to Roger seems relevant at first sight. However, the advisor charges of 18,000 have already been paid by the company. Hence, they would not make much difference to the investment decision. in like manner acquiring opening stock at the beginning of the year rather than considering the same at year end would have minimal impact on the decision (the impact due to time set of money would be very small as compared to other numbers) and hence should be neglected for analysis. In addition there are pieces of information which don not directly reflect the performance of the project and must be excluded for a fair evaluation. They would be discussed in greater detail in parting 5. 4. Cash flow Analysis using all additional information The accountants analysis was quite limited. Therefore, additional information collected by Roger needs to be incorporated in the financial analysis (Johnson, Derek). The same has been done in Table 4.1. The methodology for the same is discussed here. Table 4.1 Cash full stop Analysis using Accountants Analysis and Additional Information Year 0 1 2 3 4 Total Sales 400.00 600.00 800.00 600.00 Cost of Sales 180.00 300.00 380.00 300.00 Labour Cost 80.00 120.00 120.00 80.00 revise Other production expenses 64.00 66.00 68.00 84.00 depreciation 40.00 40.00 40.00 40.00 Administrative Overhead 54.00 76.00 74.00 74.00 Interest on loans 22.00 22.00 22.00 22.00 Total Cost 440.00 624.00 704.00 600.00 PBT -40.00 -24.00 96.00 0.00 PBDT 0.00 16.00 136.00 40.00 Depreciation for Tax purpose 60.00 45.00 33.75 25.31 Cumulative Depreciation for Tax purpose 60.00 105.00 138.75 164.06 PBT (for Tax purpose) -60.00 -29.00 102.25 14.69 PAT (for Tax purpose) -42.00 -20.30 71.58 10.28 give notice profit (for company) -62.00 -25.30 77.83 24.97 Scrap sales 20.00 0.00 0.00 0.00 20.00 Cash benefits due to sell-off of existing machine 0.00 18.0 0 18.00 18.00 18.00 Additional advertising expenses -40.00 -8.00 -8.00 -8.00 -8.00 advisor expenses -18.00 0.00 0.00 0.00 0.00 Reduction in sales of competing products -60.00 -60.00 -60.00 -60.00 Net cash flow -38.00 -112.00 -75.30 27.83 -5.03