- ► November (1350)
- The Emergence, Evolution and the Development of Ja...
- HUMAN RESOURCES and PEOPLE MANAGEMENT OF PDR HOTEL...
- COMPARING SERVICE QUALITY BETWEEN DOMESTIC HOTEL A...
- World Factbook of Criminal Justice Systems
- Is Cadaver Research Ethical?
- American Education continues to discriminate again...
- Hypothetical Development Method of Valuation (HDMV...
- An Evaluation of Lipex as a Health Intervention fo...
- QUESTIONS FOR the CEO of TOMMY HILFIGER – Europe
- DESIGNING A NETWORK: ESSAY INSTRUCTIONS
- Comparison of HRM Policy and Practice between Chin...
- Sample Business Plan of Able Corporation
- Analysis of a Case Study Finance Leadership in Nov...
- Interpersonal Attraction
- MBA paper
- QUALITY MANAGEMENT
- Dissertation requirement
- Worked answer for sample exam question – Subject: ...
- Chinese Economy:Issues and policies
- Job Costing and Process
- Compare and Contrast Political Economy with Critic...
- SOCIAL POLICY THEMES AND ISSUES
- Essay Instructions on Diploma in Strategic Sales (...
- An Impact Analysis of the Shrinking Hotels in Hong...
- Can you see the Light as art?
- Cross Cultural Communication
- Economy and Foreign Investments
- Ryanair Company Case Study
- Coalition for the Prevention of Alcohol Problems (...
- Case study :Functional organizational structure on...
- SOCIAL WORK ESSAY
- Sample Essay In the Traditional sense business hav...
- The Causes, Symptoms, Diagnosis and Treatment of t...
- Hate Crime
- Management Paper Revised
- New Marketing Campaign of Honshu Lectrum Electric ...
- Goals of Our Criminal Justice System and How They ...
- Business Plan for Go card-like
- Chronic Poverty in India: Overview Study
- Sony Ericsson’s Management of Change
- Analysis and Interpretation of Data
- • The concept of NPM and the objective of outsourc...
- THE CORRELATION OF SHRM AND COMPETITIVE ADVANTAGE
- BP BILLITON CASE STUDY ON INTERNATIONAL FINANCE
- Nike’s Business Ethics and Social Responsibilities...
- Future of Royal Dutch Shell
- Procurement function
- Relationship of Chinese Apparel Industry and Inter...
- Is Globalization a Threat or an Opportunity for Bu...
- Sport Management in Australia
- RESEARCH PROBLEM ON THE IMPACT OF COMMERCIAL BANK ...
- Product Innovation of Coca-Cola
- Workers’ Labour Bargaining Disadvantage: a case on...
- The Role of Tourism in Rural Development System
- Are Shareholders the Real Owner of the Business?
- Sexual Harassment in the Workplace
- Career Development Plan
- Realism and International Relations
- The research Paper
- The Hong Kong SAR government just uses human right...
- Auditor’s Changing World Essay
- Financial Analysis of PepsiCo Company
- Sample Essay Benefits of Having a Graduate Degree
- DISTRIBUTED WEB SERVER: ESSAY INSTRUCTIONS
- Production of inclined contour map from a set of D...
- Lessons from the World War 2
- Research proposal on Investigating the problems of...
- A Strategic Analysis of Ocean Park of Hong Kong
- Similarities and Differences of British Airways an...
- The low-cost airline industry in Europe case study...
- SAFETY MANAGEMENT
- NATIONAL BASKETBALLL ASSOCIATION
- MOVIE REVIEW : ” SECRET WINDOW “
- Pressure Sores on Heels of Older People
- Critique for safe practice: Aseptic technique
- How Important is Internet Privacy?
- Referencing Guide
- QUALITY IMPROVEMENT – SERVICE DELIVERY
- DETERMINANTS OF CHILDREN’S NON PARTICIPATION IN ED...
- RESPONSE PAPER ON RACIALIZATION
- How can risk present both opportunities and threat...
- Sample Essay Operations Management and Ethics Assi...
- Framing Taiwan Independence Movement: A Content An...
- The Importance of Mental Health
- THE WRITTEN CONSTITUTION OF THE PEOPLE’S REPUBLIC ...
- Shell Internal and External Enviromental Factors
- HINDU RELIGION AND TRADITIONS
- Investment Appraisal as a Tool for Management Deci...
- The cultural dimensions of globalization, the impa...
- Stoma or Cool-Rectal Cancer
- Strategic Marketing Plan
- CRITICALLY EVALUATE THE CLAIM THE SECURITY RESPONS...
- Ethics Component
- Building a Strong Relationship between Employers a...
- BULLYING IN JUNIOR AND MIDDLE HIGH SCHOOL
- The Auditing Profession
- AN ESSAY ON MONEY
- ▼ Oct 15 (135)
- ► September (2912)
- ► August (698)
INVESTMENT APPRAISAL AS A TOOL FOR MANAGEMENT DECISION MAKING: RESEARCH PROPOSAL
Investment appraisal is the most important decision of any business organization. It refers to the planning process that an organization conducts to determine whether their long term-investments such as research and development, new machinery, new products, new buildings and innovations are beneficial to the company or not in terms of yields and returns over a period of time. (Wikipedia, n.d., Investment Accountants, n.d.) It is a critical aspect of any financial management decision-making process because it involves a lot of money. Investment proposal is conducted to attract money into the organization and is basically a function of the financial manager.
Management commits a large amount of financial resources in investment appraisals because it is linked to tactical and strategic business decisions. Although project cost and benefits are hard to predict, and the uncertainty and risk in undertaking medium to long-term investment is high, investment decisions are aimed to achieve long term objectives which is the maximization of shareholders’ wealth. Careful and critical consideration is important in conducting investment appraisals because not only it is expensive it is also very costly, it also very difficult to reverse investment decisions that have gone awry. There are key considerations in investment decisions. These are cost, availability of funds, return on investment, the length of payback time, projected profits and if whether the financial resources used for the particular investment decision can be used somewhere else that yields better returns. (The Times 100, n.d.)
Investment appraisal is a continuous process. Many businesses approaching investment appraisal as a one stop shop have failed. As a continuous agenda, it follows some stages: search for investment opportunities, enquiry into the possible outcomes, identification of the best possible outcomes, capital budgeting (appraisal tools used to decide to continue investment or not), selection of the most viable project, implementation of the selected project, monitoring feedback and correction. (Investment Accountants, n.d.)
Capital budgeting is an important stage in investment appraisal. In this stage, financial managers use capital budgeting appraisal tools to determine if the project is worthwhile and to decide whether to continue the investment or not. The techniques most commonly used are Payback Period, Discounted Payback Period, Accounting Rate of Return (ARR), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), and Adjusted Present Value (APV). (Ansar, 2009)
Review of Related Literature and Studies
Grigalunas, Chang and Yu, 2002 conducted an illustrative case study on investment appraisal of container port. Container port development is a risky development project as it involves greater financial, economic, and environmental risks. To review the risks involved the researcher used the following methods: net present value, extensive sensitivity analyses, Monte Carlo analysis and a dynamic discrete-event model. The latter is used to determine feasibility of the port plan and its projected operations. There are four specific risked that are identified and considered in this study. These are start-up volume of moves, growth rate of moves, costs, and efficiency of yard operations. The study found out that the most critical factor that determines financial success of a proposed container port is start-up volume and growth rate.
Akalu and Turner (2001) conducted a case study of capital budgeting strategies of four companies representing different industries. The results showed that the four companies used a decentralized strategy for project decision-making. The firms also utilized a combination of tools such as discounted cash flow (DCF) with their own “value management tool”. They also modified the DCF tool to adopt to their needs. Although the firms do not follow the same technique from the start of the project up to completion, this new trend signify that there is a change or shift in the methods of capital budgeting.
Statement of the Problem
This study will describe a firm’s investment appraisal technique over a period of time. This study will also identify and describe specific investment appraisal techniques used by the firm. Finally this study will also determine whether a specific investment appraisal technique is effective for that particular firm of not.
A case study method is the most appropriate methodology for the review of investment appraisal techniques. The data gathering tools that will be employed in this study are interviews, secondary data gathering and direct observation and others as deemed necessary.
Akalu, MM and Turner JR, 2001. The Practice of Investment Appraisal. Abstract only. Available at:< http://papers.ssrn.com/sol3/papers.cfm?abstract_id=370935> [Accessed 26 May 2011].
Ansar, 2009. What are Investment Appraisal Techniques. [online] Available at:< http://www.helium.com/items/1507869-investment-appraisal-techniques-npv-apv-payback-arr-irr> [Accessed 26 May 2011]
Cook, Mark. Approaches to Investment Appraisal. [online] Available at< http://findarticles.com/p/articles/mi_qa3889/is_200204/ai_n9076100/> [Accessed 26 May 2011].
Grigalunas, TA., Chang Y-T., Luo, M., 2002. Containerport Investment Appraisal And Risk Analysis: Illustrative Case Study. [online] Available at:< http://trid.trb.org/view.aspx?id=723687> [Accessed 26 May 2011].
Investment Accountants, n.d. Investment Appraisal for Everyone Especially Non Financial Managers. http://www.accountantnextdoor.com/investment-appraisal-for-everyone-especially-non-financial-managers-part-one/> [Accessed 26 May 2011].
Plant, P., 2000. Capital Investment Appraisal Process. [online] Available at:< http://www2.accaglobal.com/students/student_accountant/archive/2000/8/15148> [Accessed 26 May 2011].
The Times 100, n.d. Investment Appraisal. [online] Available at:< http://www.thetimes100.co.uk/theory/theory–investment-appraisal–380.php> [Accessed 26 May 2011].
Wikipedia, n.d. Capital Budgeting. [online] Available at:<http://en.wikipedia.org/wiki/Capital_budgeting> [Accessed 26 May 2011].
CASE ANALYSIS OF MARKS AND SPENCER Table of Contents I. Introduction .. 3 II. External Analysis .. 4 a. P...
The American Dream is difficult to describe, since every American has a different concept of it. For most men however, it is closely asso...
PEST ANALYSIS OF WOOLWORTHS LIMITED PEST Analysis as a Human Resource Strategy Any business organization operates within...
THE ROLE OF UK GOVERNMENT IN EMPLOYMENT RELATIONS Table of Contents I. Introduction .. 3 II. The Government ...
Introduction The omnipresence of global trends and innovations debunk the idea of business monopoly and empire states. Today, the tr...
Case Study “Richard Branson and the Virgin Group of Companies in 200 2 ” by Robert M. Grant An Assignment submitted in...
Scientific Management of McDonalds Introduction The true interest and prosperity of employer can be determined in the long term years ...
PESTLE analysis of Primark in UK Introduction Every organization provided different strategies to be effective in the market. However...
Business Case Study Background of the Business Cathay Pacific Airways in an international Hong Kong based airline that...
Introduction The Australian airline industry is very competitive and the entry of a new low-cost carrier, the Tiger Airways ...