Investment Appraisal

Formal

The document provided to a Board, Finance Director, or other approval body to support the request for expenditure on investment. It outlines the cost of the investment, perceived risks, likely returns and business benefits. The quantification of its attractiveness is measured by specific financial return calculations. These include Payback, NPV (also called VAE), IRR, VAE %

Real-world Example

Before committing to a new production line, a company runs an investment appraisal - comparing measures like Payback, NPV, and IRR across a few options to decide which, if any, is worth funding.