Investment Analysis

Chapter 3
Investment Analysis
3.1 Introduction
The technique of aligning your financial values and objectives with your financial resources is
known as financial investments. The importance of investment planning in financial planning
cannot be overstated. The planning method's goal is to teach you how to match your economic
means with your financial objectives. The viability of a project will be investigated in this
chapter utilizing a variety of approaches. The conventional approaches, such as Payback Period
and ARR, are the first. Second, contemporary approaches such as back period, NPV. Aside from
inflation and taxation, there are other factors to consider.
 We'll start with an R .O . 150,000 investment, which we'll put into real estate and small
businesses.
 We would invest in real estate and the SME business to diversify our assets.
Figure 3.1: Investment Plan

3.2 Analysis
Part 1- Expected Cashflow
Table 3.1: Cash Flow Analysis for Villa
Villa
Cash Flow Statement
[OMR]
2021 2022 2023 2024 2025
Operating Cash Flow
Net Earnings 2,500 12,000 22,000 25,000 29,000

Plus: Depreciation &
Amortization 20,000 18,000 18,000 17,000 16,000
Less: Changes in
Working Capital 10,000 1,500 1,200 700 900
Cash from Operations 12,500 28,500 38,800 41,300 44,100
Investing Cash Flow

Investments in Property
& Equipment 70,000 70,000 70,000 70,000 70,000
Cash from Investing 70,000 70,000 70,000 70,000 70,000
Financing Cash Flow

Issuance (repayment) of
debt - - (20,000) - -
equity 170,000 - - - -
Cash from Financing 170,000 - (20,000) - -
Net Increase (decrease)

in Cash 112,500 (41,500) (51,200) (28,700) (25,900)
Opening Cash Balance - 167,971 181,210 183,715 211,069

Closing Cash Balance
112,500 126,471 130,010 155,015 185,169
Table 3.2: Cash Flow Analysis for Apartment
Apartment
Cash Flow Statement
[OMR]
2021 2022 2023 2024 2025

Operating Cash Flow
Net Earnings 3,000 12,000 22,000 25,000 29,000

Amortization 20,000 18,000 18,000 17,000 16,000
Less: Changes in Working
Capital 1,000 1,200 1,100 900 800
Investing Cash Flow

Investments in Property &
Equipment 45,000 45,000 45,000 45,000 45,000
Financing Cash Flow

debt - - (20,000) - -
equity 170,000 - - - -
Net Increase (decrease) in

Cash 147,000 (16,200) (26,100) (3,900) (800)

Closing Cash Balance 147,000 151,771 155,110 179,815 210,269
Table 3.3: Cash Flow Analysis for Salon
Salon
Cash Flow Statement
[OMR]
2021 2022 2023 2024 2025
Operating Cash Flow
Net Earnings 5,000 6,000 7,000 8,000 12,000

Amortization 20,000 18,000 18,000 17,000 16,000
Less: Changes in Working
Capital 1,000 1,200 1,100 900 800
Investing Cash Flow

Investments in Property &
Equipment 35,000 35,000 35,000 35,000 35,000
Financing Cash Flow

debt - - (10,000) - -
equity 150,000 - - - -
Net Increase (decrease) in

Cash 139,000 (12,200) (21,100) (10,900) (7,800)

Closing Cash Balance
139,000 155,771 160,110 172,815 203,269
The above analysis is the possible and expected cashflows from the investment of RO150000
into two real estate and one SME’s.
3.3 Analysis
Part 2- Feasibility Analysis
3.3.1 Investment in Real Estate and SME
The investment in Villa is projected to pay off in 9 years and 1 month. The Apartment, on the
other hand, is anticipated to be open in 5.3 years (5 years and 3 months). The Salon, on the other
hand, has a 7-year expectation. Furthermore, given the possibility of a reduced payback time.
Table 3.4 : Projects Payback Period∧Discounted Payback Period
Projects P.B. P D.P.B. P

Project 1: Villa 8.1 10.5
Project 2: Apartment 5.0 6.0
Project 3: Salon 7.5 8.5
As indicated by the above table, acknowledge project 2 is better since, supposing that it is not
exactly the breaking point acknowledged and in the event that it is more than the cutoff
dismissed. what's more, the speculation ought to be at the very least 5 years. every one of the 3
activities are over 5 years however the task 2 is the most reduced year. indeed, even with thought
of D.P.B. P acknowledge the venture 2. then, at that point, the undertaking 3 is gone to the
subsequent option since it is not as much as task 1, its 8.5. Lastly reject project 1 team to the
significant stretch. beneath there is a diagram present all the data.
Payback period and Discounted Payback period

12
10
8
Years
0
P.B.P D.P.B. P
Figure 3.2: P.P & D.P.P
The above graph shows the results of the projects for the payback period and discounted payback
periods.
3.3.2 Accounting Rate of Return
The productivity of the activities is checked by ARR Method. As the outcome shows that Project
2 accomplishes the most elevated level of benefit, assessed at about 40%.
Table 3.5 : Percentage of ARR Projects
Projects ARR
Project 1: Villa 25%
Project 2: Apartment 40%
Project 3: Salon 30%
ARR
45%
40%
35%
30%
Percentage
25%
20%
15%
10%
5%
0%
Accounting Rate of Return
Figure 3.3: ARR of Projects
The above graph shows the accounting rate of return for the projects.
3.3 Net Present Value
Using the NPV approach, it will analyze the cash inflow to see if it has a positive or negative
value before deciding whether to approve or reject the project.
Table 3.6: NPV
Projects Project 1 Project 2 Project 3

NPV 3995.1634 1553.485 147.0176
The above table shows the NPV values for the projects.
NPV
4500
4000
3500
3000
2500
Axis Title
2000
1500
1000
500
0
NPV
Figure 3.4: NPV of Projects
To represent that all undertakings have a positive worth of money inflows (+). Thus, if the net
present worth is positive acknowledge the undertaking and on the off chance that it is negative
oddball it. for this situation we can acknowledge every one of the three tasks as per the
outcomes. Task 1 show most elevated money inflows, it is around 3995.1634. though project 3 is
the most reduced.

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Chapter 3

Figure 3.1: Investment Plan

Part 1- Expected Cashflow

Table 3.1: Cash Flow Analysis for Villa

Net Earnings 2,500 12,000 22,000 25,000 29,000

Cash from Operations 12,500 28,500 38,800 41,300 44,100

Investing Cash Flow

Cash from Investing 70,000 70,000 70,000 70,000 70,000

Financing Cash Flow

Cash from Financing 170,000 - (20,000) - -

Net Increase (decrease)

Opening Cash Balance - 167,971 181,210 183,715 211,069

Table 3.2: Cash Flow Analysis for Apartment

2021 2022 2023 2024 2025

Net Earnings 3,000 12,000 22,000 25,000 29,000

Cash from Operations 22,000 28,800 38,900 41,100 44,200

Investing Cash Flow

Cash from Investing 45,000 45,000 45,000 45,000 45,000

Financing Cash Flow

Cash from Financing 170,000 - (20,000) - -

Net Increase (decrease) in

Opening Cash Balance - 167,971 181,210 183,715 211,069

Table 3.3: Cash Flow Analysis for Salon

Net Earnings 5,000 6,000 7,000 8,000 12,000

Cash from Operations 24,000 22,800 23,900 24,100 27,200

Investing Cash Flow

Cash from Investing 35,000 35,000 35,000 35,000 35,000

Financing Cash Flow

Cash from Financing 150,000 - (10,000) - -

Net Increase (decrease) in

Opening Cash Balance - 167,971 181,210 183,715 211,069

Part 2- Feasibility Analysis

3.3.1 Investment in Real Estate and SME

Table 3.4 : Projects Payback Period∧Discounted Payback Period

Projects P.B. P D.P.B. P

Payback period and Discounted Payback period

Figure 3.2: P.P & D.P.P

3.3.2 Accounting Rate of Return

Figure 3.3: ARR of Projects

3.3 Net Present Value

Table 3.6: NPV

Projects Project 1 Project 2 Project 3

Figure 3.4: NPV of Projects

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