Investment Appraisal Question. Trevor must decide which project is best to invest money into. All three projects will bring him financial benefits

due to the low cost, fast payback and high ARR percentage. The only financial downfall of option 3 is the low NPV and profit, meaning that the time value of money is going to decrease the value of his profit. Trevor should not choose this option if he is purely interested in the financial success and profit of the project, but if non-financial factors are more important to the success. If Trevor decided to invest in project 3, he may face the problem of lack of experience in the sector, therefore he may need to employ staff, meaning their wage would add to the cost of this project. If Trevor is just interested in an simple, less risky project to earn cash for his early retirement then this would be the one to invest in, however further financial problems could occur due to recruitment and training. Despite Option 2 being ranked the worst on the table, it is the project that would be the most efficient for Trevor. Trevor likes the idea that he would be minimizing stock wastage levels by using the waste fruit and vege he currently sells, also he believes the level of staffing is sufficient. Trevor already has experience in this sector, and it could be successful. The only real issue with Option 2 is the time that it will take for Trevor to receive the full financial benefit of the project. However this may not become a problem as the money would be for an early retirement, so there is no urgency for the cash to be returned. Option 1 stands out as being a high earner, with large returns, and a high ARR and NVP. The issue with this is payback, however if Trevor is more interested in the profitability of the project after the 5 years, this would be ideal. E-commerce is becoming increasingly popular, and Trevor believes that this will be successful, and he will benefit others by providing a fair trade range. The demand for this product could be high, so it is important that Trevor researches into the internet market, however he has experience with the product that he is selling. I believe the best option for Trevor would be Option 1. Option 1 gives Trevor the best overall profitability for the project. This may be a risky venture as the majority of the cash flow is earnt in later years; this could be affected by external factors. However by providing his specialist product lines online he is making them available to a larger and growing market. He is therefore is gaining a competitive advantage over the supermarket as he is widening his business environment. Appendix 4 suggests just how popular online stores can be. The online venture could prevent profits dwindling due to supermarket competition.