This project work is based on “investment appraisal
a guide to effective managerial decision” A case study of selected
manufacturing companies in Nnewi Anambra state. These companies are Chikason
group, Ebeto group and luis carter industries. Inited. This research work of
investment appraisal is to help investigate the problems in selecting improper
investment, and to know if investment appraisal is needed and to know the
impact of investment appraisal towards managerial decision. Five research
questions and four hypothesis were employed. The statistical tools used to
analyze the data convent analysis. Tradition a non discounting techniques and discounted
cash flows techniques. Chi –square techniques was adopted to measure the
difference between observed frequencies and histogram was used to show the
results. It was found that investment appraisal in organization encourage
workers to a greater extent. Investment appraisal helps organization in
analyzing it’s financial position. Other finding include the fact that
investment appraisal are responsible for the promotion recognition and
maintenance of organizations. The implication of this findings is that without
investment appraisal many organization cannot meet the demands of the populace.
It was recommend that the managers of every organization should adopt proper
investment appraisal programme to enable them get the best out of their employees
and that government should adopt some incentives measures reduce the cost of
capital and encourage the young investor to invest wisely.
TABLE OF CONTENTS
Table of content
1.1 Background of the study
1.2 Statement of the problem
1.3 Purpose of the study
1.4 Significance of the study
1.5 Research question
1.7 Scope of the study
1.8 Definition of the study
2.0 Literature Review
2.1 Research questions / hypothesis / theories
2.2 Current literature on theories models
hypothesis and research question
2.3 Summary of literature review
3.1 Design of the study
3.2 Area of the study
3.3 Population of the study
3.4 Sample of the study
3.5 Instrument for data collection
3.6 Validation of the instrument
3.7 Distribution and retrieval of the
3.8 Method of data analysis
4.2 Finding and discussion
4.3 Discussion of finding
5.0 Summary, conclusion and recommendation
5.1 Summary of finding
BACKGROUND OF THE STUDY
business in this modern generation are growing rapidly and becoming more competitive
among other investment (long run investment). Decision involves the acquisition
of machinery, vehicles, buildings, patent right, new product line, copy right
research and development and so on are critical decision facing managers of
today’s business. however, these exists a greater task to the management when
it comes to conflicting decision as regards to the selection of projects to
these circumstance, the management is left with series of potential projects
with pregnant risk and returns. Given that the resources are limited in supply,
the investor are bound to consider many factors before selecting a particular
is the key word to every established firm, organization both private and public
make decision on projector investment at hand overtime, as managers that make
decisions about a variety of specific investment, one could say that the
organizations performance in any particularly year is the combined result of
all the investment under way during the year.
investment is any scheme of investing resources, which can reasonably be
analyzed and appraised as an independent unit. This in-depth analysis and
combination between the movements of cash outflow and cash inflow decision is known
as investment appraisal.
aspect of investment that leads to capital expenditure decision should be
evaluated or appraised properly. Therefore, this research is prepared to study
the investment appraisal as a guide effective managerial decisions. Appraisal
of investment is one of the key drives of business financial system. Sound
investment that implemented well founded strategies are essential to creating
shareholders wealth and must appraised both in a proper content and with sound
appraisal techniques. Under this aspect, an economic trade-off must be made
between the resources of cash benefits to be obtained. Analyzing this trade is
essentially an appraisal process that makes an economic assessment of
combination of positive and negative cash pattern. This task is difficult
because it deals with future conditions subject to uncertainties and risks.
investment appraisal is of paramount importance of all investment both large
and small some investments are beneficial during their early stage with high
returns, however these cash inflow are not adequately maintained from such
project or investment during the maturity periods. With these developments, the
investors, workers, and management are not motivated with such result.
without a planned scrutiny of the investment, management decision will be
jeopardize and management standard and policy will be instable.
established these facts, far an effective investment appraisal the following
factors and steps must be religiously considered.
a Project identification
b Project evaluation
c Project selection
selection of an alternative should be determined by the use of these appraisal
NON DISCOUNTING CASH FLOW TECHNIQUES
i Payback period
ii Accounting rate of return.
B DISCOUNTING CASH FLOW TECHNIQUES
i Net present valve (NPV)
ii Internal rate of return (IRR)
iii Profitability index (PI)
The application of cost analysis
should be employed to determine the cost of capital and hurdle rate where
discounting approach is the organization policy. The expected coupled with the
uncertainties or riskness associated with the investment for an in-depth
comparative analysis, with the investment for an in-depth comparative analysis
with these rules and principles, managerial decision stand at the best
alternative to maximize the organizational profit.
of the things that help an organization or a firm to grow rapidly, the ability
to make right decision as regards to investment. This work will help the
researcher to find the possible solution to some problems that is facing
management in terms of decision making in regards to investment.
Does investment appraisal lead management to invest on
the appropriate project?
Does investment appraisal help management to invest on
Does correct investment decision improve productively?
1.3 PURPOSE /
OBJECTIVE OF THE STUDY
OF THE STUDY IS TO:
a Study the needs of investment appraisal
the impact of investment appraisal towards managerial decision.
investigate the problems on centered in the use of discounting and discounting
appraisal techniques in selecting some conflicting investment.
1.3 PURPOSE /
OBJECTIVE OF THE STUDY
The main objective of this research work is to identity
and examine investment appraisal in managerial decision making. Having said
this, the purpose / objectives of this study includes:
investigate the problems on centered in the use of discounting and appraisal
techniques in selecting some conflicting investment.
the impact of investment appraisal towards managerial decision.
study the needs of investment appraisal to organizations
OF THE STUDY
research work of investment appraisal is very important the solution and the
recommendation that emanate form this study will assist the financial analyst
and the managers in their decision making towards capital investment.
help and expose managers to understand the need to appraisal and any given
investment to know its viability.
also aids the managers in knowing the factors and appraisal techniques to
consider during mutually independent or conflicting investment.
investment appraisal play an important role in manufacturing firms?
b Does management makes right decision
c Does investment trades on the right
d Does the
appraisal techniques use in evaluating investment appraisal adequate?
investing on the right project improve the firm\s profitability of investment
1.6 RESEARCH HYPOTHESIS
Tests are to be concluded to ascertain the result of
the following hypothesis.
Investment appraisal does not aid effective managerial decision making.
appraisal aid effective managerial decision making.
There is no significant relationship between investments appraisal and the
Hi: There is significant relationship between
investments appraisal and the firms productivity
1.6 SCOPE OF
research work was conducted with selected industries in Nnewi such as Chikason
Group, Luis Carter Indusries Nnewi. Being that these companies represent other
manufacturing industrie. Although the researcher would have like ot carry out
moer esearch on their companies in Nnewi. But due to shortage of time and other
constraint, the above companies where the one which this research has been
conduct in place of others.
1.8 DEFINITION OF TERMS
RATE OF RETURN (ARR)
is non-discount cash flow capital budgeting technique expressed as the expected
average annual operating income divided by the initial investment.
BALANCED SCORE CARD:
is a performance measure system that strikes a balance between financial and operating measures link performance to rewards, and gives explicit recognition
to the diversify of stake holder interest.
is a formal mechanism for gathering, organizing and communicating information
about an organizations activities.
is a technique measures projects on the basic of the period over which the
investment pays back itself or he period of recovery of the initial investment
or it is defined as the period usually expressed in years, in which the cash
outflows will equate the cash inflow form a project (CIMA)
An annuity is a constant sum of
money receivable or payable over a specific period of time.
NET PRESENT VALUE (NPV)
a summation of all discounted cash flow (DCF) associated with a project, this
is the difference between he present value of cash out lay or outflow and the
positive present value of the cash inflows.
INTERNAL RATE OF RETURN
cost of capital or return that will produce an NPV of zero if applied to a
project. It is a break even point cost of capital.
situation in which a company does not have sufficient fund to execute worth
while investment projects.
PROFITABILITY INDEX (PI)
It is the
contribution per limiting factor approach that is, it is actually a benefit /
cost analysis of projects.
increase in estimates as a result of changes in price levels.
situation in which the occurrence of future uncertain events is known but the
possibilities of such future events can quantified.
situation in which the probability or possibility of occurrence of such future
event can not be quantified.
Is the purposeful
choice from among a set of alternative courses of action designed to achieve
responsibility center where success is measured not only by its income but also
by relating that income to its invested capital as in ration of income to the
value of the capital employed.