ABSTRACT
At the most general level shows the objective of any investment as being an increase in the real income of the community. The purpose of investment appraisal is to identify the ways in which and the extent to which alternative projects may contribute to increasing community welfare and to compare alternatives. For the purposes of exposition, distinguish five processes which have to be undertaken in making an investment appraisal. The five processes are: formulation of the alternatives for appraisal, identification of the elements of benefit and cost, forecasting the elements, evaluation of the elements, and interpretation of the results. The chapter considers a small firm, then the relationship between prices and investment is clear. The level of prices charged, in relation to costs, determines the availability of investible resources through retained profits and, eventually, through the market, for the firm. It concludes by discussing important aspects of the relationship between commercial and non-commercial elements in the transport sector.
