35 Investment appraisal
‘There is nothing so disastrous as a rational investment policy in an irrational world.’
John Maynard Keynes, English economist
In a nutshell
Capital investment is required for most business opportunities, for example purchasing a new long-term asset, developing a new product, entering a new market or acquiring another entity. An organisation will need to invest cash today in expectation of future returns.
‘Investment appraisal’ is the process of evaluating opportunities to see if their benefit is greater than their cost. It enables investments of different sizes and time periods to be objectively compared. Investment appraisal also enables organisations to prioritise projects when capital is limited.
The main benefits ...
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