AN EVALUATION OF INVESTMENT APPRAISAL AND ITS APPLICATION TECHNIQUES IN A MANUFACTURING INDUSTRY.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Modern time cal1s for efficient al1ocation of resources by the management of any organization. The survival and growth of any organization makes profitability an indispensable element in the operation of a business organization. This function thus, involves the firm’s decision to commit its limited funds in long-term assets and other profitable activities with a view to earning a stream of income over a period of time in the near future. Investment appraisal decision in any organization is always handled with an utmost care. This is due to the fact that the fund available to the business organization is limited. Thus, in view of the strategic importance and the nature of investment decision, there is need for a critical analysis and appraisal on investment opportunities before the commitment of the scarce resources to it with the aim of maximizing return. Hence, by investment appraisal and its application techniques refers to those traditional and scientific tools that management of a business organization makes use of as a guide in investing into viable and lucrative investment opportunities.

1.2 Statement of the Problem

The choice of best investment opportunities no doubt accrues a lot of benefit to an organization. The stream of income over a period of time is essential for profitability purpose, which has the potential to intensify the survival and accelerate the growth of the business organization with a resultant increase in the wealth of the owner. From another perspective, a wrong choice of investment opportunity due to inability to appraisal it critically in terms of outcome, cash profile and so on will not only regard the growth of the business organization but might make it die prematurely. This research work is therefore meant to provide solution to know the scope and application of investment appraisal and its application technique, be it investing in existing or new business.

1.3 Objectives of the Study

·         To find out the extent to which the manufacturing industry apply investment appraisal and its application techniques in their investment decision

·         Examining the effect of application of investment appraisal on the success of manufacturing industries

·         Examining the comparative advantage that the decision makers will derive and disadvantages that they may likely encounter in the course of appraising investment and its application techniques.

·         To ascertain the duration in making use of investing appraisal techniques.