Investment Appraisal Techniques in Business Finance

Running Head: BUSINESS FINANCE
Business finance
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BUSINESS FINANCE
Executive summary
In this report explains the need of finance in a business and how investment appraisal is helping
the companies in choosing the right investment project. Then different method of investments
appraisal are explained and how it benefits the company, shareholders and investors.

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BUSINESS FINANCE
Table of Contents
Introduction..........................................................................................................................3
Methods...............................................................................................................................3
Example...............................................................................................................................6
Benefits................................................................................................................................6
Conclusion...........................................................................................................................8
Reference list.......................................................................................................................9

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BUSINESS FINANCE
Introduction
Business needs money to run the business operation without which it cannot run for long
period. So business invest in long term funds to fund their business. But before investing
company uses some techniques to identify the profit or return on the investment which is known
as the investment appraisal. Investment appraisal is the part of capital budget consist of different
methods or techniques which is used to increase the value of investment after identifying the
return on the investment. Investment in project can be of any capital purchase, purchase of plant,
purchase of factory or equipment’s (Vesty, Brooks and Oliver 2015). Investment appraisal is
mainly used when the return on investment is not measureable. They are primarily used to
appraise the performance of new investments. Investment appraisal techniques are chosen after
checking the profitable of different techniques available. It puts a value of benefit on the
investment done. The main points that forms the investment appraisal are finance which is
assessed commonly, legal which checks the investments future legislation, environmental which
considers the environmental impact of the investment, social which checks the return on
investment in terms of quality of life, operational which measures the consumers satisfaction and
risk which measures the business and operational risk on the basis of investment (Harris, E.,
2017).
Methods
Investment appraisal being part of the capital budget primarily plans the investment
requirement of the firm. It is a process of budgeting the capital and investment expenditure of a
company and it is selected after checking the needs of the company. There are some investment