Investment Appraisal Methods
LITERATURE REVIEW OF INVESTMENT APPRAISAL METHODS
What is meant by investment appraisal practices?
The investment appraisal process includes the generation of ideas, assessment and authorization, implementation and control of the project (Dennis R. Young, 2007). Decision-making is increasingly more complex today because of uncertainty. Additionally, most capital projects involve numerous variables and possible outcomes. For instance, estimating cash flows associated with a project involves working capital requirements, project risk, tax considerations, expected rates of inflation, and disposal values. It is necessary to understand existing markets to forecast project revenues, assess competitive impacts of the project, and determine the life cycle of the project. Investment Appraisal is therefore more than the identification and evaluation of suitable projects. It includes consideration of timing and the identification and balancing of risk.
The importance of investment appraisal practices
A major problem for decision makers in enterprises is the appraisal of potential investment projects that can absorb capital assets. This evaluation, also known as investment appraisal, is really crucial for the future of any firm, since it determines the financial sources of the firm's budget and ultimately defines the level of the shareholders wealth. In theoretical finance, several methods of investment appraisal are developed in order to help financial managers or accountants to evaluate with increased certainty cash flows, viability and profitability of any investment project (Rosenberg, 2001). Capital budgeting decisions are among the most crucial and critical business decisions that any bank can take to achieve economic development (Dr P Shanmuka Rao, 2010). Given the importance of investment decisions, it is essential that there is proper screening of investment proposals. Vast sums of money can be easily wasted if the investment turns out to be wrong or
What is meant by investment appraisal practices?
The investment appraisal process includes the generation of ideas, assessment and authorization, implementation and control of the project (Dennis R. Young, 2007). Decision-making is increasingly more complex today because of uncertainty. Additionally, most capital projects involve numerous variables and possible outcomes. For instance, estimating cash flows associated with a project involves working capital requirements, project risk, tax considerations, expected rates of inflation, and disposal values. It is necessary to understand existing markets to forecast project revenues, assess competitive impacts of the project, and determine the life cycle of the project. Investment Appraisal is therefore more than the identification and evaluation of suitable projects. It includes consideration of timing and the identification and balancing of risk.
The importance of investment appraisal practices
A major problem for decision makers in enterprises is the appraisal of potential investment projects that can absorb capital assets. This evaluation, also known as investment appraisal, is really crucial for the future of any firm, since it determines the financial sources of the firm's budget and ultimately defines the level of the shareholders wealth. In theoretical finance, several methods of investment appraisal are developed in order to help financial managers or accountants to evaluate with increased certainty cash flows, viability and profitability of any investment project (Rosenberg, 2001). Capital budgeting decisions are among the most crucial and critical business decisions that any bank can take to achieve economic development (Dr P Shanmuka Rao, 2010). Given the importance of investment decisions, it is essential that there is proper screening of investment proposals. Vast sums of money can be easily wasted if the investment turns out to be wrong or