C/F/312. Perfect Engineering: investment appraisal and valuation of production capacity extension & capital budgeting

The paper critically evaluates the decision of Perfect Engineering Company to extend their production capacity at a cost of 350 million pounds offering a project appraisal to see whether this investment is economically viable. The reasons behind the decision are considered examining whether the present manufacturing plant can be fully utilised to increase production. Alternative investments are evaluated using various valuation models, e.g. NPV and ARR, in order to come up with the best decision.