AZAR plc. has recently been approached to supply raw materials to eight projects. However, management is concerned that the existing funds available to the company are insufficient to execute all the projects.
Based on management’s recommendation, £1,320,00 has been allocated to execute some of the projects. These projects are labeled 1-8. The projects are not mutually exclusive. The table below provides you with the cost of each project, duration of each project and expected cash inflows at the end of each year. All the cashflows are in annuity. The estimated cost of capital is 10%.
Project Cost (in £) Project duration (in years) Annual cash inflow (in £)
1 (800,000) 20 117,200
2 (200,000) 8 48,000
3 (100,000) 5 28,000
4 (170,000) 15 24,000
5 (5200,000) 10 110,000
6 (150,000) 6 36,000
7 (500,000) 10 82,000
8 (500,000) 3 202,000
AZAR plc. has sought your advice as to which of the above projects should it select to invest the £1,320,000. The projects are divisible.
Required
1) Calculate the Net Present Value (NPV) for each project
a) State the NPV decision rule
b) Based on the NPV decision rule, select the projects that should be financed with the £1,320,000 budget
c) Calculate the overall NPV for the selected projects in part b)
(Total: 25 marks)
2) Calculate the Profitability Index (PI) for each project
a) Use the calculation in part 2) to rank the projects from the most preferred to the least preferred
b) Explain the PI decision rule
c) Based on the PI decision rule select which of the projects should be financed with the £1,320,000 budget
d) Calculate the overall NPV for the selected projects in part c)
(Total: 25 marks)
3) Calculate the Internal rate of return of (i) Project 1, which has an initial cost of £800,000 and an annual cash inflow of £117,200 for 20 years; and (ii) Project 2, which has an initial cost of £200,000 and an annual cash inflow of £48,000 for 8 years. All the cashflows are in annuity.
Given that AZAR plc. operates a 14% minimum required rate of return policy, based on your IRR analysis, advice on which of the projects should be accepted or rejected.
(Total: 25 marks)
4) Comment on the importance of investment appraisal and explain the advantages and disadvantages for each of the following investment appraisal techniques
I. Net Present Value
II. Internal rate of return
III. Profitability index
IV. Modified internal rate of return
established both why and how R2P emerged to become an internationally accepted norm, the assessment of how it has affected African conflict over the 21st-century, merits analytical focus. It must be said that each of the case studies that will be discussed are dramatically different situations, this makes the application of Responsibility to Protect different in each case and thus the dimension and nature of how intervention is applied must be viewed through this perspective of situational difference.
Arguably the most prominent case in which Responsibility to Protect can be seen to have been enacted upon in the 21st-century is that of the 2011 Libyan civil conflict. Over the period February 2011-12, 21,490 Libyans were killed at a rate of 5.1 per 1000 people per year, a further 19,700 were injured and 435,000 were displaced. (Daw, Dau and El-Buzedi 2015, pp101-107) The extent to which this can be considered a mass atrocity can be measured by the UN’s response. This UN response came rapidly on the 26th of February 2011, just three days after the conflict began, as the UN Security Council unanimously adopted resolution 1970. The resolution expressed a “grave concern for the situation in Libya,” at the “gross and systematic violation of human rights,” crucially it is also explicit in calling upon the Libyan authorities for their “responsibility to protect its population,” and the need to “respect the freedoms of peaceful assembly.” (UN, n.d) Resolution 1970 also imposed sanctions upon the Libyan state such as the freezing of economic resources on Libyan territory. This action was reinforced by the UN adoption of resolution 1973 on March 17th 2011, which “reiterated responsibility of the Libyan authorities to protect the Libyan population,” and that all armed parties within the conflict “take all feasible steps to protect civilians,” yet again reaffirming language of the Responsibility to Protect doctrine. In addition resolution 1973 called for an immediate ceasefire and a no-fly zone over Libya. Two days after this resolution a NATO-led coalition force began bombing governmental forces which resulted in a military victory for the NATO coalition. The extent to which this is seen as an appropriate use of R2P however is debated. A realist concept that whilst a primary objective of the mandate in Libya was ‘civilian protection’, this changed over the course of the conflict towards regime change, a goal which is unlikely to have had the uncontested support of the Security Council. (Abomo 2018, p244) The opposition to this is put forward by Amstutz, who argues that the principal goal of the intervention was to “prevent the slaughter of civilians” in support of the R2P doctrine, as a result of this aim and the military intervention to achieve it, “the downfall of a lunatic,” was necessary.(Amstutz 2018, p161) This is an argument I would tend to concur with as, in my view, the Libyan government failed in its responsibility to protect its citizens, and whilst regime change came as a result of necessary humanitarian intervention, the principal goal was the protection of human rights. A further argument which is made against the intervention in Libya is one which is also levelled against the concept of the R2P doctrine itself, whether it indeed unacceptably breaches a level of sovereignty. In a polemic article regarding Libyan intervention, Keeler argues “it seemed clear that for many politicians, humanitarian intervention has become no more than an inappropriate violation of national sovereignty.” (Keeler, 2011)