- 5 Marks
Question
b. Within the framework of a capital budget and strategic planning, state the FIVE steps of investment appraisal. (5 Marks)
Answer
The five steps of investment appraisal within the framework of a capital budget and strategic planning are:
- Generating investment proposals: Identify potential investment opportunities in line with the company’s strategic objectives.
- Estimating cash flows: Forecast the relevant cash inflows and outflows associated with each investment proposal.
- Evaluating proposals: Assess the financial viability of each proposal using techniques such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period.
- Implementing the project: Once a proposal is accepted, allocate the necessary resources and begin execution.
- Monitoring and review: Regularly monitor the performance of the investment to ensure it aligns with initial expectations and make adjustments if necessary.
- Tags: Capital Budgeting, Investment Appraisal, Strategic Planning
- Level: Level 1
- Topic: Investment Decisions
- Series: MAY 2024
- Uploader: Dotse