10.3.1—Investment appraisal concept

Investment appraisal evaluates whether a project’s expected benefits justify its cost and risk. It should consider cash flows, timing, capacity, strategy and alternatives.

Different methods simplify different aspects. The decision depends on assumptions about demand, costs, asset life, discount rate and the opportunity cost of funds.

A new machine may reduce unit cost but require training and downtime; its value depends on the incremental cash flow and strategic fit, not price alone.

A positive calculation does not remove implementation risk or guarantee the forecast.