Developing a New Business Model for Jaguar Land Rover

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The financial aspect of the company is studied using various methodologies such as cash flow analysis and various investment appraisal methods. In this project we have chosen to use NPV and IRR methods of investment appraisal because of several reasons. Investment appraisal could have also been performed by other methods like Payback Period, but the drawback of this method is that it does not consider cash flows that arrive after the payback period and hence can lead to nonsensical decision in some cases. On the other hand NPV and IRR both are more reliable because they consider all cash flows till the end of the project. Further in Payback Period method equal weight is given to all cash flows arriving before payback period, in spite of the fact that more distant cash flows are less valuable. This problem is also overcome with NPV and IRR methods because both consider time value of money. Again NPV and IRR methods also help to ensure whether the investment will increase the firm’s value. Other methods cannot provide this information. The accounting rate of return method of investment appraisal has also been rejected for use in this project because it considers only profits that do not equal cash and also it does not consider time value of money.

Cash Flow Analysis - It is performed for each model to analyse the company's financial health over the model time of 5 years. On the other hand, investment appraisal is required to evaluate the attractiveness of an investment (in this case business model) and is an integral part of capital budgeting. For this project investment appraisal is performed by the following methods.

Net present value (NPV) is the difference between the present value of cash inflows and cash outflows and can be ...

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