Sustainability

through
investment
McCain
Group Member: Cheng Teck Lee
Helen Wu
Kester Zhou
Keisuke Fujiwara
Q1:
Investment appraisal referred to the
quantitative techniques used to calculate the
financial costs and investment decision.
McCain use investment appraisal
technique to find is that renewable
energy project worth to invest.
Will it recover its cost?
Will it make a saving?
Will it provide a profit over original
investment?
Will it help to improve its public image?
Q2
Payback period----amount of time
needed for an investment project to
earn enough profits to repay the initial
cost of the investment.
McCain use payback method to
predict how much time does it take for
its wind turbines project and its lagoon
to repay its initial costs.

Advantages & Drawbacks
of PBP method
Advantages
Drawbacks
*Simple Calculation, Easy to
understand
*Business take no account of the
overall, long term profitability of
projects( too much Attention PBP)
*Stresses cash flow and speed of
return
*They may ignores the timing of cash
flows
*Help to recognize the risks------Less
payback period, less risks
*McCain possibly will ignore the time
value of money

*Help to avoid financial problems by
making budget plans due to the
accomplishment of the project.
*McCain possibly will ignore the time
value of money

PBP may lead McCain give up long-
term projects, encourages short-
termism

Q3
Discounted cash flow helps a business consider
what the value of money likely to be received in the
future is worth today.
Consider the effects of time on investments.
How interest rates affect the present value of future
revenues.
Help to find out NPV of businesss profit in the future
DCF is not only about inflation, the money is always
worthless in the tomorrow than you can get in
today.
Benefits for McCain to use
Discounted Cash Flow method
Recognizing the whole life of a project
Helps to avoid financial problems by taking into
account net cash flow and outflows for the duration of
the project
Identify the actual profitability of the projects, is that
still worth participating
Makes allowance for the opportunity cost involved in
investing
Evaluation &
Recommendation
Help to identify profitability
Financial Planning can be properly made under DCF
Help McCain to get a more clear image of their projects
by take Opportunity Cost into consideration.
McCain should be careful with using DCF, its
complicated so that may lead business into
misunderstanding
McCain should not always believe in results, since DCF
highly dependent to the assumption (which is not always
true) and changing discounted rate.
My recommendation:1: McCain should be careful with
using DCF. 2: Always trying to get accurate discounted
rate. 3: Suspect numbers, take other factors into
consideration.

Question 4
Environmental issues are harmful for human
activities( eg, Pollution, Global Warming)
McCain produce food which means they use lots of
electricity; use more electricity means produce
more Co2. McCain will also waste lots of water
when theyre producing food.
McCains Objective is to reduce the amount of gas
and electricity that they use to produce food.
They invest lots of money on renewable energy
projects and they are committed by government
and environmental friendly organization.
Advantage &
Disadvantages
Advantages Disadvantages
Improve Public Image Costs lots of money on the initial
costs and maintenance to operate
Supported by Government and
Environmental Organization
Renewable Energy Projects are
highly dependent on uncertain
factors (Political, Seasonal
Unique Market Position---
Environmental Friendly Food,
Increase Sales
Higher Risks for McCain to have
financial problems since its a
long term project. (Cash Flow
Problem)
Time Consuming
Evaluation and
Recommendation
Government may assist McCains Project
Consumer will be more willing to buy Eco-friendly
products from McCain since people are paying
attention to environmental issues.
McCain can improve its public image, help to
attract more customers, and they can retain Market
Leader.
McCain will spend lots of money on their wind
turbine project and it need 4 years to achieve
break-even point. Which is highly risky
Recommendation: McCains investment is worth it,
through it costs lots of money, but they will
successfully make a great public image and they
will make more profit then.

Thank you for
your attention~