5TOBM-MDFL11-Investment appraisal

It helps to know the profitability or convenience of an investment project. It is carried out through the use of quantitative techniques that evaluate the financial viability of the project.

• Investment

• Investment appraisal

It means buying capital assets, such as new equipment, vehicles, and buildings and / or upgrading existing fixed assets.

• Investment

• Investment appraisal

The quantitative investments appraisal DOES NOT require the following information

• The initial capital cost of the investment

• Estimated life expectancy

• The residual value of the investment

• The forecasted net returns or net cash flows from the project

• A "feeling" for what is likely to be more successful

Quantitative investment appraisal methods DOES NOT include

• Payback period

• Average rate of return

• Net present value using discounted cash flows

• Intuition

Estimates the length of time required for an investment project to pay back its initial cost outlay.

• Average rate of return

• Payback period

• Net present value

Measures the annual net return on an investment as a percentage of its capital cost. Assesses the profitability per annum generated by a project over a period of time. Also known a the accounting rate of return.

• Payback period

• Average rate of return

• Net present value