Embraer Company(Brazil Company) BRICS, Why should invest Essay

Embraer Company(Brazil Company) BRICS, Why should invest - Essay Example Different investment appraisal techniques would be applied on the forecasted financial statements of the company and then the company would be evaluated for the purpose of investment. Some of the investment appraisal techniques that have been used to analyse the company’s performance are: Net present value of the future cash flows, internal rate of return, Benefit to cost ratio, Profitability Index, and average accounting rate of return. These techniques have been used to analyse whether the company is a good option to invest or not. The expected net income has been discounted with the estimated growth of the company. Expected growth has been calculated from the growth the company achieved from its sales of last complete year i.e. sales of year 2010 and sales of year 2011 have been used to calculate the estimated growth. It has been found from the financials of the company that the company has been making an investment every year. The investment made by the company has been varying since 2007 and therefore average of the investment of the company has been taken and the same amount or the average amount has been assumed to occur in the years to come. The average investment made by the company is found to be $376.33 million (Embraer d, 2012). As the net present value of the future cash flows is positive therefore according to the NPV, one should invest in the company. However, NPV is not very high but even positive NPV investment opportunity is worth investing as it would have a higher return in future. Internal rate of return is rate of return where the future value of the cash flows is equal to 0. Internal rate of return of future cash flows is 82.37% and this is the rate where the future cash flows after being discounted are showing an NPV of 0 (Gitman, 2003). As the value of IRR is 82.37% which is more than the growth