Investment Appraisal Techniques Of Investment

2690 Words Sep 18th, 2014 11 Pages
Table of Contents
Investment Appraisal Techniques ………………………………………………………….. 1 Net Present Value ………………………………………………………………….. 1 Payback Period …………………………………………………………………………… 2 Accounting Rate of Return ……………………………………………………….... 2 Internal Rate of Return ………………………………………………………………….. 3 Profitability Index …………………………………………………………………. 3
Investment Decision for European Financial Group ………………………………………. 4
Answer to question b ………………………………………………………………………….. 5
Efficient Market Hypothesis ………………………………………………………………….. 6 Investment Appraisal Techniques

Investment has many definitions. In finance, it is ‘the purchase of a financial product or other item of value with an expectation of favorable future returns.’1 In business, investment is ‘the purchase by a producer of a physical good, such as durable equipment or inventory, in the hope of improving future business.’2 But whatever meaning of investment is, it all goes down to using money in the hope of gaining more in the future. For this paper, the focus is investment appraisal. It is used in making investment decisions. Investment appraisal is ‘an evaluation of the attractiveness of an investment proposal. It is used to assess the time period, rate of return, value, expected profit and risk of the investments.’3 Investment appraisal has four methods namely: Payback Period, Accounting Rate of Return, Net Present Value, and Internal Rate of Return. The table below shows the objective functions and investment criteria of investment…
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