Fly - by - Night Airlines Essay

2630 Words Aug 14th, 2010 11 Pages
INDEX PAGE
Page 1.0 Executive Summary 2

2.0 2.1 2.2 2.3 2.4 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7

Case Study 1 (Simpson and Selph LTD) Introduction Question 1 Question 2 Question 3 Case Study 2 (Fly – by – Night Airlines) Introduction Question 1 Question 2 Question 3 Question 4 Question 5 Question 6

4 4 6 7 8 10 10 11 12 13 15 15 15

4.0

Conclusion and Recommendation

15

5.0

Bibliography

16

6.0

Declaration by Student

17

1.0

EXECUTIVE SUMMARY

This assignment consists of two case studies, the Simpson and Selph Ltd and the Fly – by – Nights Airlines. Case Study 1: The Simpson and Selph Ltd, a small carpet manufacturing company located in Macon, Georgia. The Simpson and Selph Ltd are faced with a
But in this case, there conflicting aspects, when looking at the above variables for the perfect selection. A Machine that I can choose is the Davidson Machine. The Net Present Value of this Machine is higher than of the New Harley Machine. Although the payback is higher than the New Harley and the profitability index is lower than of the New Harley. The Davidson is solely chosen based on the NPV, because NPV is the difference between an investment’s market value and its cost. The Payback method is ignored, because it does not cater for risk, only the amount of time required for an investment to generate cash flows to recover its initial costs. QUESTION 2 *Option 1* Refer to Exhibit 3: Discount Rate NPV IRR MIRR Payback PI = = = = = = 11.66% - \$ 11, 233.09 10.59% 10.31% 4.3 Years 1.29

Page 6 of 17

*OPTION 2* Refer to Exhibit 4: Discount Rate NPV IRR MIRR Payback PI = = = = = = 11.66% \$ 24, 207.76 13.44% 12.86% 4.11 Years 1.39

We recommend the New Davidson Machine. The NPV of the New Harley is negative, that is why we will choose the New Davidson Machine as it has a positive NPV. It is clear from the results that the IRR, MIRR, Payback and the PI of the New Davidson are more

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