Table of contents
1. Executive Summary 2
2. Introduction to Strategy 2
3. Strategic Planning Process 4
4. Performance Management 4
5. Methods of Investment Appraisal 5
5.1 Accounting Rate of Return (ARR) 5
5.2 Payback Period Approach 6
5.3 Discounted Cash Flow 7
5.3.1 Net Present Value (NPV) 7
5.3.2 Internal Rate of Return (IRR) 8
6. Conclusion 12
7. References 13
1. Executive Summary
An investment is a financial cost towards profit for the stakeholder including owner, employees and the financial investors (stockholders). The value of the investment is determined based on the amount of profit achieved upon deducting the cost of the investment. This assignment provides a brief description of the strategic decision making involved in the selection of an investment. Advantages and Disadvantages of the three main investment methods are reviewed to evaluate the best possible investment method in terms of their feasibility and profitability.
2. Introduction to Strategy
Investment opportunities need to be evaluated and prioritized as companies have limited capital to be invested. According to Kaplan & Norton (1996) “strategy is a set of hypothesis about cause and effect”. Strategic Investment Decisions are considered both important and difficult as these decisions are taken to ensure that the investments made are, in line with the company o ...