ou have recently joined the finance team at Rockham Plc a manufacturer of components for the motor industry. On the first day, you heard a few colleagues talking about a potential investment of a new machine and the importance of budgeting as a successful tool within the overarching strategic planning process. As these areas are of particular interest you request to be part of the project team that assesses the viability of the investment. You are provided with the following details: The purchase cost of the new machine is £40,000,000. The machine will produce an expected annual cash inflow of £17,000,000, with an annual cash outflow of £6,400,000. It is expected the machine will have a useful life of 5 years after which it can be sold for £5,000,000. The machine will be depreciated using the straight-line method. Rockham Plc currently has a cost of capital of 7%.
Produce a report that explains and analyses the key merits and limitations of the differing investment appraisal techniques. (20 marks)
Produce a report that identifies and explains the key benefits and limitations of using budgets as a tool for strategic planning. (20 marks)
please explain elaborately
