(a)[2]
Explain why non-financial factors are left out by traditional investment appraisal techniques.
(b)[2]
Suggest two non-financial factors that are overlooked by traditional investment appraisal techniques.
(c)[4]
Calculate the net cash flow expected in each of years 1 to 4.
(d)[8]
Calculate, to two decimal places, the internal rate of return (IRR) for buying the licence.
(e)[3]
Discuss whether it would be more financially sensible for the company to end production at the close of year 3. Assume that the fixed costs and the cost of the licence would remain unchanged. Calculations are not required.
(f)[6]
Advise the directors whether or not other investment appraisal techniques ought also to be used. Justify your answer. Calculations are not required.