StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Slide Investment Appraisal - Essay Example

Cite this document
Summary
The paper "Slide Investment Appraisal " highlights that discounted cash flow techniques such as NPV and IRR discount cash flow so that future value is equivalent to the present value of money. Time consideration is an essential factor in this regard…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.3% of users find it useful
Slide Investment Appraisal
Read Text Preview

Extract of sample "Slide Investment Appraisal"

The non-discounting factors do not take into consideration the time value of money and therefore are considered inferior to discounted cash flow techniques. Concerning the projects in this paper, both kinds of techniques have been considered, namely NPV and the payback method (Bierman and Smidt, 2012). NPV is one of the most preferred discounting techniques deployed in investment appraisal. In this method, future inflows are converted into present value by discounting them using a discount factor.

The main benefit of discounting inflows is that it helps understand the actual worth of the inflows and reflects the impact of inflation and potential risks on the investment. Generally, the cost of capital is considered an appropriate discounting measure because it is developed using the existing market risk factor. There are two criteria for accepting a project: first, NPV should be positive, and second, a project with the highest NPV should be selected. Negative NPV-bearing projects are rejected because they would generate a negative return in the long run (Sangster, 1993; Savvides, 1994).

It was observed that none of the projects of Jones & Simpson Ltd generate a positive NPV. Project A generated a negative value while Project B was observed to break even. Breakeven stands for a no-profit / no-loss situation. If the company has no other choices besides projects A and B, Project B is recommended because project A involves more investment and will generate a negative return in the long run. The payback period is one of the non-discounting techniques used by managers for evaluating projects.

However, this technique is used along with other discounting techniques so that the time factor is not neglected. Generally, managers analyze projects using NPV, IRR, and payback period together. One of the key benefits of the payback period is that it focuses on cash flow instead of accounting for profit. The determination process is also very simple for the payback period and the method helps in providing a clear picture of the rapidness with which the initial investment is recovered (Bierman and Smidt, 2012; Lefley, 1996).

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Case study presentation notes Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
Case study presentation notes Essay Example | Topics and Well Written Essays - 2000 words. Retrieved from https://studentshare.org/finance-accounting/1673050-case-study-presentationnotes
(Case Study presentation notes Essay Example | Topics and Well Written Essays - 2000 Words)
Case Study presentation notes Essay Example | Topics and Well Written Essays - 2000 Words. https://studentshare.org/finance-accounting/1673050-case-study-presentationnotes.
“Case Study presentation notes Essay Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/finance-accounting/1673050-case-study-presentationnotes.
  • Cited: 0 times

CHECK THESE SAMPLES OF Slide Investment Appraisal

Manifold Options in Order to Expand Overseas

ARR shows the profitability of an investment project and facilitates comparison between different projects.... Thirdly, heavy capital investment will be needed to install machinery in a new place.... Moreover, the licensor can get a higher ROI because of its minimum investment....
18 Pages (4500 words) Essay

Investment appraisal as a form of management control

This essay focuses on investment appraisal as a form of management control.... It is essential for the management to choose the appropriate investment appraisal technique to be followed and hence the next section focuses on the selection approach.... This section throws light on the merits and demerits of the various investment appraisal techniques as well.... n order to understand the need for investment appraisal to management control, it is essential to discuss about the various types of investments and the degree of impact they have on a company's growth....
14 Pages (3500 words) Essay

Investment Appraisal

The paper "investment appraisal" presents detailed information that the Internal rate of return is a discount rate often used in capital budgeting that makes the net present value of all cash flows streams (cost of investment) from a particular project equal to zero.... This process takes the form of an investment appraisal, through which the investor has to look at several factors before taking this decision.... Investors always face the dilemma of choosing between projects as to which of the projects will give the best returns that will help them maximize their wealth should they risk their money and carry out the investment....
6 Pages (1500 words) Case Study

Market Entry Strategies

The various options such as franchising, licensing, Joint Venture, and Foreign Direct investment (FDI) will be discussed with their relative pros and cons.... Thirdly, heavy capital investment will be needed in order to install machinery in the new place.... Moreover, the licensor can get a higher ROI because of its minimum investment....
17 Pages (4250 words) Research Paper

Financial Appraisal Tools and Methodologies

A financial appraisal is a term commonly used in finance and accounting and as such, it refers to a method of a financial decision mostly applied in such economic aspects as policies, projects or programs.... The paper 'Financial appraisal Tools and Methodologies' is an entertaining example of a finance & accounting case study.... A financial appraisal is a term commonly used in finance and accounting and as such, it refers to a method of a financial decision mostly applied in such economic aspects as policies, projects, or programs....
9 Pages (2250 words) Case Study

Investment Appraisal Analysis

The assignment "investment appraisal Analysis" focuses on the critical complex analysis of the student's answers to the tasks in investment appraisal.... investment appraisal is a method or technique used to appraise or determine good from bad investments.... Based on the results of investment appraisal, business people can easily point out investments or projects that can give them the best returns as the top management officials identify the advantages and risks involved in a project....
9 Pages (2250 words) Assignment

Use of Multiple Methods to Examine Risk in Project Appraisals

Project appraisal is the methodology of evaluating and addressing propositions before assets are conferred.... Project appraisal is the methodology of evaluating and addressing propositions before assets are conferred.... These days, an appraisal is a wellspring of disarray and trouble for projects which were found some years ago (Balcombe et al.... Reviews of the operation of Single Project Budget plans have highlighted worries about the configuration and operation of project appraisal frameworks, including Mechanistic and unyielding frameworks, an absence of freedom and objectivity, an absence of the clear meaning of the phases of the appraisal, and of obligation regarding these stages, an absence of narrative confirmation in the wake of doing the appraisal (Dikmen et al....
6 Pages (1500 words) Essay

Investment Appraisal Techniques

Generally, the paper "investment appraisal Techniques" is a great example of a finance and accounting essay.... A capital investment analyst in a company has the duty of informing the boards of directors of the various investment appraisal that can be used in a company to evaluate the viability of a project.... Generally, the paper "investment appraisal Techniques" is a great example of a finance and accounting essay.... A capital investment analyst in a company has the duty of informing the boards of directors of the various investment appraisal that can be used in a company to evaluate the viability of a project....
6 Pages (1500 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us