Capital Investment Appraisal is the process of budgeting a specific amount of money known as capital for short or long-term investment. It involves planning for the right business and project that the organisation can invest in, in order to improve the achievement of the business objectives.
There are various budgeting tools that are used by companies or organizations to analyze and forecast the expected returns for different investments. Sangster, (1993) analyzes capital investments can assess various types of investments made ranging from fixed assets such as land, machinery, real estate, and research, among other fixed assets.
The use of capital budgeting techniques will examine the benefits of long-term investment assets from one year and beyond. Capital budgeting techniques include payback period, internal rate of return, and others. Capital budgeting techniques are used to understand and measure the organization’s capital investment over the investment period. The organization needs to generate enough returns to avoid losses in the future as it involves a huge amount of money.
The capital investment appraisal techniques can be used cutting across varieties of techniques like net present value, internal rate of return, modified internal rate of return, accounting rate of return, and more.
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