Evaluation of Capital Investment Appraisal Measures for Machine Selection

ACCOUNTING FOR
BUSINESS

Contents
INTRODUCTION...........................................................................................................................2
1. Evaluation of capital investment appraisal measures along with recommendation for
selection of machine:..............................................................................................................2
2.Reasons along with explanation that why the director of Finance claiming that IRR is more
than 7%:..................................................................................................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
In financial management there are various techniques to evaluate the financial viability of
the project for the business enterprise (Anyaehie and Iyowu, 2020). These techniques help the
entity to judges which project is beneficial for them that gives the entity the bunch of speed and
durability in order to competitive advantage to them against the competitors. In this report these
techniques have been addressed and their result on the machine has been observed. That result
gives an idea on the selection of the machines along with adequate recommendation has been
made for selection of the same.
TASK
1. Evaluation of capital investment appraisal measures along with recommendation for selection
of machine:
Investment appraisal method includes net present value, profitability index, accounting rate
of return, internal rate of return, discounted payback period and so on. These techniques will
provide an understanding to the business concern on selection of the desired project by applying
them in the systematic manner (Chen, Sun, and Xie, 2018). These methods are not only meet the
standards but practical also to use them in the data available. The best method amongst them in
NPV as it considers time value of money also that gives accurate result for selection of desired
project.
Different Methods for Selection of Project
Payback Period Under this method the initial time taken by the desired project has
been calculated which gives an idea that how much time is
required to recover the project cost.
Accounting Rate of Return This method highlights the return of investment received by the
organisation on the specific project. The return is divided by the
cost in order to arrive at ARR on percentage basis.
Net Present Value This method is popular and amongst the best method as it
considers time value of money.
Internal Rate of Return This method provides the rate at which present value of cash
inflows is equal to cash outflows. At this Rate NPV will be zero.