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Investment Appraisal Methods and Models

:	Uwe Götze, Deryl Northcott, Peter Schuster
:	Investment Appraisal Methods and Models
:	Springer-Verlag
:	9783662458518
:	2
:	CHF 96.60
:

:	Betriebswirtschaft
:	English

:	371
:	Wasserzeichen/DRM
:	PC/MAC/eReader/Tablet
:	PDF

This book provides an introduction to investment appraisal and presents a range of methods and models, some of which are not widely known, or at least not well covered by other textbooks. Each approach is thoroughly described, evaluated and illustrated using examples, with its assumptions and limitations analyzed in terms of their implications for investment decision-making practice. Investment decisions are of vital importance to all companies. Getting these decisions right is crucial but, due to a complex and dynamic business environment, this remains a challenging management task. Effective appraisal methods are valuable tools in supporting investment decision-making. As organisations continue to seek a competitive edge, it is increasingly important that management accountants and strategic decision-makers have a sound knowledge of these tools.

	Preface	6
	Guided Tour of the Book	8
	Contents	10
	List of Figures	14
	Part I: Introduction	17
	1: Capital Budgeting and Investment Decisions	18
	1.1 Characteristics and Classification of Investment Projects	18
	Key Concept	18
	Key Concept	21
	1.2 Investment Planning and Investment Decisions	21
	1.2.1 Investment Planning as Part of the Management Process	21
	1.2.2 Investment Planning as Part of the Capital Investment Decision-Making Process	23
	1.2.3 Strategic Analysis Tools Supporting the Capital Investment Decision-Making Process	34
	1.3 Investment Appraisal Methods as Tools for Investment Planning	38
	Key Decisions	38
	Further Reading - Part I	40
	Part II: Basic Methods of Investment Appraisal	42
	2: Static Methods	43
	Key Concept	43
	2.1 Cost Comparison Method	45
	Key Concept	45
	2.2 Profit Comparison Method	51
	Key Concept	51
	2.3 Average Rate of Return Method	53
	Key Concept	53
	2.4 Static Payback Period Method	56
	Key Concept	56
	Key Concept	56
	Assessment Material	58
	Exercise 2.1 (Cost Comparison Method)	58
	Exercise 2.2 (Cost Comparison Method)	59
	Exercise 2.3 (Profit Comparison, Average Rate of Return and Payback Method)	60
	3: Discounted Cash Flow Methods	61
	3.1 Introduction	61
	3.2 Net Present Value Method	64
	Key Concept	64
	Key Concept	65
	3.3 Annuity Method	75
	Key Concept	75
	Key Concept	75
	3.4 Internal Rate of Return Method	77
	Key Concept	77
	Key Concept	78
	Key Concept	83
	3.5 Dynamic Payback Period Method	85
	Key Concept	85
	Key Concept	85
	3.6 Data Collection	87
	Assessment Material	93
	Exercise 3.1 (Net Present Value Method and Annuity Method)	93
	Exercise 3.2 (Net Present Value Method and Internal Rate of Return Method)	93
	Exercise 3.3 (Dynamic Investment Appraisal Methods)	94
	Further Reading - Part II	95
	Part III: Advanced Methods and Applications of Investment Appraisal	98
	4: Compounded Cash Flow Methods	99
	4.1 Compound Value Method	99
	Key Concept	99
	Key Concept	100
	4.2 Critical Debt Interest Rate Method	104
	Key Concept	104
	Key Concept	104
	4.3 Visualisation of Financial Implications (VoFI) Method	106
	Key Concept	107
	Key Concept	107
	Assessment Material	114
	Exercise 4.1 (Compound Value Method, Critical Debt Interest Rate Method and VoFI Method)	114
	Exercise 4.2 (Dynamic Investment Appraisal Methods)	115
	5: Selected Further Applications of Investment Appraisal Methods	117
	5.1 Income Taxes and Investment Decisions	117
	5.1.1 Taxes and the Net Present Value Method	117
	5.1.2 Taxes and the Visualisation of Financial Implications (VoFI) Method	122
	5.2 The Assessment of Foreign Direct Investments	124
	5.2.1 Special Characteristics of Foreign Direct Investments	124
	5.2.2 Net Present Value Model and the Assessment of Foreign Direct Investments	127
	5.2.3 The Visualisation of Financial Implications (VoFI) Method and the Assessment of Foreign Investments	133
	5.3 Models for Economic Life and Replacement Time Decisions	137
	5.3.1 Overview	137
	5.3.2 Optimum Economic Life Without Subsequent Projects	139
	Key Concept	139
	Key Concept	140
	5.3.3 Optimum Economic Life with a Limited Number of Identical Subsequent Projects	142
	Key Concept	143
	Key Concept	144
	5.3.4 Optimum Economic Life with an Unlimited Number of Identical Subsequent Projects	145
	Key Concept	146
	Key Concept	146
	Key Concept	147
	5.3.5 Optimum Replacement Time with an Unlimited Number of Identical Subsequent Projects	149
	Key Concept	149
	Key Concept	150
	5.3.6 Optimum Replacement Time with a Limited Number of Non-identical Subsequent Projects	152
	Key Concept	153
	5.4 Models to Determine Optimum Investment Timing	155
	Assessment Material	164
	Exercise 5.1 (Taxes in the Investment Appraisal)	164
	Exercise 5.2 (Economic Life)	165
	Exercise 5.3 (Economic Life)	165
	Exercise 5.4 (Economic Life and Replacement Time)	166
	Exercise 5.5 (Determining Economic Life)	168
	Exercise 5.6 (Determining Economic Life with the Net Present Value, Internal Rate of Return and Compound Value Method)	168
	Exercise 5.7 (Profitability Assessment and Investment Timing Decisions)	169
	Further Reading - Part III	170
	Part IV: Multi-Criteria Methods and Simultaneous Decision-Making	172
	6: Multi-criteria Methods	173
	6.1 Introduction	173
	6.2 Utility Value Analysis	177
	Key Concept	178
	6.3 Analytic Hierarchy Process	181
	Key Concept	187
	6.4 Multi-attribute Utility Theory	194
	Key Concept	199
	6.5 PROMETHEE	203
	Assessment Material	214
	Exercise 6.1 (Utility Value Analysis)	214
	Exercise 6.2 (Analytical Hierarchy Process)	216
	Exercise 6.3 (Multi-attribute Utility Theory)	217
	Exercise 6.4 (PROMETHEE)	218
	7: Simultaneous Decision-Making Models	219
	7.1 Static Model for Simultaneous Investment and Financing Decisions (Dean Model)	219
	7.2 Multi-tier Model of Simultaneous Investment and Financing Decisions (Hax and Weingartner Model)	226
	Key Concept	231
	7.3 Multi-tier Model of Simultaneous Investment and Production Decisions (Extended Förstner and Henn Model)	236