Financial Times Handbook of Corporate Finance, 2nd Edition

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TRADITIONAL APPRAISAL TECHNIQUES

IntroductionWhat appraisal techniques do businesses use?PaybackAccounting rate of returnInternal rate of return: reasons for continued popularityConclusion

Introduction

The payback and accounting rate of return (ARR) methods of evaluating capital investment proposals have historically been, and continue to be, very popular approaches, despite the best efforts of a number of writers to denigrate them. It is important to understand the disadvantages of these methods, but it is also useful to be aware of why practical business people still see a great deal of merit in observing the outcome of these calculations.

What appraisal techniques do businesses use?

A number of surveys enquiring into the appraisal methods ...