1- Discounted Cash Flows Techniques
I agree that investment appraisal should add value to the business organizations.For an organisation it is important to remain competitive to survive.Ideas for new products ,improvements in existing products and ways to operate them efficiently are the factors the organization has to consider on.Taking decisions investment in new products or areas always complex and need to be analysed with details.This means,appropriate methods are the important part of this decision-making process.Therefore, some methods have been established for screening projects.
Long term and short-term decisions are the methods used by business to evaluate investment opportunities. The short term decisions involve a set of choices with varying cost.This method will affect the organization for a short period of time and difference in cost of the different menu options is small.Maybe as a result of this the same decision will come back to manager again after made the first decision.Looking at long term decisions, they may affect the company for years and may bring significant financial costs.Long term decisions are called capital budgeting decisions.That is because it has long term effects and they may not modified in a short period of time. Short term decisions have short term effects and can be changed at any time if the option that we been chosen before was not effective. (Brooks,2010)
Typically, capital budgeting is based on long term decision making process.Also capital budgeting decisions focuses on timing, comparing, planning.It is a decision that at the end of the process after the budgeting model criticized ,it has to accept or reject.
There are basically types models used by business to evaluate investment opportunities.Although some of them are standard models, some of them are modified from these standard methods.
* Payback Period (PP)
* Discounted Payback Period
* Accounting Rate of Return (ARR)... [continues]
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