ABSTRACT
Steps in Investment Appraisal: first, the total project requirements need to be ascertained over the relevant number of years. Second, the sum total of all the possible projects is then computed over the time period and it is compared with the available capital. Most often, there is a shortfall as the capital is restricted or rationed for a whole variety of reasons for example, desire of business owner to stay within a certain size, shortage of cash, inability to raise the finance from the bank or shareholders. Third, the projects then have to be ranked alongside each other, to establish which gives the best rate of return based on their relative benefits and costs. It is not always the project which gives the highest return which is approved. When a sum of money is set aside for investing in capital projects, one large project might use less of that sum of money than two small projects.
