Investment Appraisal Techniques: Payback Period, NPV, ARR, IRR

MFR

INTRODUCTION
Importance of investment appraisal
• Feasibility
• Decision-making

Cont.
Yield better results

Appraisal techniques
• Investment appraisal techniques play vital role in the company
to make better decisions related to investment.
• Victoria Babies Ltd is planning for expansion in varied
aspects.
• It is essential for taking decision with the help of appraisal
techniques.
• These include IRR (Internal Rate of Return), NPV (Net
Present Value), Payback period and ARR (Accounting Rate of
Return). These all techniques are discussed below-

Cont.
• Payback period
• It shows recovery period of invested project.

Cont.
• Advantages
• The main advantage of payback period is that it
evaluates risk associated with the project.
• Moreover, it provides clarity about when investment
will yield desired returns.
• Another advantage of this method is that it is simple
to calculate and provide better results by utilising
time factor.
• It is focused on risk factor of the project so that
adequate returns can be generated with much ease.