From the calculation, it is obvious that IRR of this project is 4% (See Appendix 3). It can be analysed based on the calculation that IRR is lower than the WACC, which means that the project is likely to provide low rate of return compared with the cost of capital. This project will harm the wealth of the investors and the firm’s performance. From the results of simple Cash in versus cash out method, it can be known that this project is expected to provide positive cash flows at the end. After 25 years, it is expected that this project will give great return in terms of cash flows (See Appendix 3).
It is determined from the PB outcomes that this project is not expected to cover the initial investment till the end of the project life which is 25 years (See Appendix 4). This indicates that project is not good in terms of covering the project cost during the project life. In the same way, negative NPV value is obtained from the calculation, which also shows that this project is not expected to maximize the wealth of the shareholders (See Appendix 5). Negative NPV value indicates that total present values is higher than the initial investment amount of the project. This method considers time value of money concept in accessing an investment proposal. Thus it is an effective method to determine the return from an investment. On the basis of this NPV value, it can be said that this project may have an influence on the return of shareholders and their benefits. It is clearly seen from the PI method that this project can provide negative returns (See Appendix 6). The obtained value of PI is -43% shows that this project may not be able to generate profitability for this firm.
Based on the above analysed results of investment appraisal techniques, it is recommended that Cutting Edge Limited should not go ahead with the Robot Project. The project is not likely to offer enough cash flows to offer greater return on investment (Gibson, 2012). This may affect the ability of this firm to maintain or improve satisfaction of the investors and market value.