Operating Cash Flows: |
|
|||||
Project 1 |
Project 2 |
|||||
Particulars |
Amount |
Depreciation |
Operating Cash Flow |
Amount |
Depreciation |
Operating Cash Flow |
Initial Cost |
100 |
|
|
60 |
|
|
Operating Profit/(Loss): |
||||||
Year 1 |
29 |
33.3 |
62.3 |
18 |
20 |
38 |
Year 2 |
-1 |
33.3 |
32.3 |
-2 |
20 |
18 |
Year 3 |
2 |
33.3 |
35.3 |
4 |
20 |
24 |
Net Operating Cash Flow |
|
|
130 |
|
|
80 |
Payback Period: |
|
|||
Project 1 |
Project 2 |
|||
Particulars |
Operating Cash Flow |
Cumulative Cash Flow |
Operating Cash Flow |
Cumulative Cash Flow |
Year: |
||||
0 |
-100 |
-100 |
-60 |
-60 |
1 |
62.3 |
-37.7 |
38 |
-22 |
2 |
32.3 |
-5.3 |
18 |
-4 |
3 |
35.3 |
30.0 |
24 |
20 |
Residual Value |
7.0 |
37.0 |
6 |
26 |
Payback Period (in years) |
|
2.2 |
|
2.17 |
WACC: |
|
||
Particulars |
Weightage |
Return Rate |
Weighted Return Rate |
Equity |
50% |
9% |
4.500% |
Debt |
50% |
7% |
3.500% |
Total |
|
|
8.000% |
Add: Risk Premium |
2% |
||
Weighted Average Cost of Capital |
|
|
10.000% |
Net Present Value: |
|
|||
Year |
||||
Particulars |
0 |
1 |
2 |
3 |
Project 1: |
||||
Initial Cost |
-100 |
|||
Operating Cash Flow |
62.33 |
32.33 |
35.33 |
|
Residual Value |
7.00 |
|||
Net Cash Flow |
-100 |
62.33 |
32.33 |
42.33 |
Discount Rate |
10.00% |
10.00% |
10.00% |
10.00% |
Discounted Cash Flow |
-100.0 |
56.7 |
26.7 |
31.8 |
Net Present Value |
15.2 |
|
||
Project 2: |
||||
Initial Cost |
-60 |
|||
Operating Cash Flow |
38.00 |
18.00 |
24.00 |
|
Residual Value |
6.00 |
|||
Net Cash Flow |
-60 |
38.00 |
18.00 |
30.00 |
Discount Rate |
10.00% |
10.00% |
10.00% |
10.00% |
Discounted Cash Flow |
-60.0 |
34.5 |
14.9 |
22.5 |
Net Present Value |
12.0 |
|
As per the operating cash flow which is generated by both the projects the project 1 shows that the cash generated from such is more which is shown to be £ 1,30,000 and the cash which is generated from Project 2 is £ 80,000. The above calculations make it clear that the cash generated from project 1 is more than project 2. The payback period which is calculated for the projects shows that project 2 has a better payback period as compared to Project 1 which means that the business will be able to recover the initial investment more quickly in case of project 2. The net present value which is computed for project 1 and project 2 shows that the cash generation which is expected from project 1 is much more and is shown as £ 15,200. The NPV of Project 2 as calculated shows that it is lesser than project 1’s NPV and it is shown as £ 12,000. Thus from the above analysis, it can be recommended that the management of CyberScore Plc should select Project 1 investment plan as the cash generated and NPV of the project is much better than project 1’s results.
The term corporate Governance and Corporate Social Responsibility is used simultaneously by many organization but there exists a major difference between the two concepts. There exists a relationship between the two concepts but the same can be established if the two concepts are understood in its full meaning. Corporate Governance may be defined as the balance which the business needs to have between the economic goals and social goals and between communal goals and individual goals (Tricker and Tricker 2015). The framework establishes set of rules which facilitates efficient use of resources for the activities of the business and the business accept full accountability for such activities. The aim of the corporate governance framework is to promote ethical norms and align the interest of individuals
On the other hand, Corporate Social Responsibility states that the business should carry our its operations in such a manner that is ethical and the activities of the business should affect the ability of the future generation to produce similar profits. The concept is concerned with the business acting in the best interest of the society and also maintain the ethical standards of the business (Schwartz 2017). The concepts states that the business is responsible to the stakeholders which includes creditors, investors, money lenders, suppliers and the society at large and always act in the best interest of the society (Servaes and Tamayo 2013). The relationship which can be established between Corporate Governance and Corporate Social Responsibility are discussed below:
The non-executive managers of the business are responsible for the overall management of the business and are also members of the board of directors of the business. The performance criteria of the non-executive director of the business are discussed below:
Traditional Budgeting may be defined as the process wherein the last year’s budget is taken as a base in order to prepare the current year’s budget. The management only makes necessary changes in the previous budgets and this prepares the current year’s budget of the business. For the preparation of such a budget the management considers factors such as inflation rate, consumer demand and the present market situation (Réka, ?tefan and Daniel 2014).
The advantages which can be effectively pointed out for traditional budgets are explained below in details:
The traditional budgeting system also faces certain limitations which are discussed below in details:
Reference
Bach, S., 2013. Performance management. Managing human resources: Human resource management in transition, pp.221-342.
Bhattacharya, C.B., Korschun, D., Sen, S. and Routledge, H., 2017. Corporate social responsibility. Journal of International Law, 26(2).
Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), pp.1-23.
Dudin, M., Kucuri, G., Fedorova, I., Dzusova, S. and Namitulina, A., 2015. The innovative business model canvas in the system of effective budgeting.
Lorain, M.A., García Domonte, A. and Sastre Peláez, F., 2015. Traditional budgeting during financial crisis. Cuadernos de Gestión, 15(2).
Ntim, C.G., Lindop, S., Osei, K.A. and Thomas, D.A., 2015. Executive compensation, corporate governance and corporate performance: a simultaneous equation approach. Managerial and Decision Economics, 36(2), pp.67-96.
Pietrzak, ?., 2013. Traditional versus activity-based budgeting in non-manufacturing companies. Social Sciences, 82(4), pp.26-37.
Réka, C.I., ?tefan, P. and Daniel, C.V., 2014. TRADITIONAL BUDGETING VERSUS BEYOND BUDGETING: A LITERATURE REVIEW. Annals of the University of Oradea, Economic Science Series, 23(1).
Sandalgaard, N. and Nikolaj Bukh, P., 2014. Beyond Budgeting and change: a case study. Journal of Accounting & Organizational Change, 10(3), pp.409-423.
Schwartz, M.S., 2017. Corporate social responsibility. Routledge.
Servaes, H. and Tamayo, A., 2013. The impact of corporate social responsibility on firm value: The role of customer awareness. Management science, 59(5), pp.1045-1061.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
Wildavsky, A., 2017. Budgeting and governing. Routledge.
Zeller, T.L. and Metzger, L.M., 2013. Good Bye Traditional Budgeting, Hello Rolling Forecast: Has The Time Come?. American Journal of Business Education (Online), 6(3), p.299.
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