It can be challenging to establish accurate long-term project cash flows when dealing with investment appraisal. However, in reality, this is not a waste of time, considering the benefits that a company can reap upon successful completion of investment appraisal. It is important to note that an investment appraisal involves the analysis done to evaluate a company’s investment profitability over the span of an asset together with considerations of strategic and affordability fit (“Apm,” n.d., par. 1). Investment appraisal considers the trade-off between a company’s whole-life costs, profits, and deployment risks. This helps a company determine the best value for money option (Praxis, 2019, ). It will rather be a waste of time to invest money in a venture without putting into account the time value of money than taking time to evaluate carefully money options that will lead to the realisation of the anticipated quantitative and qualitative gains.
Meanwhile, from professional accounting grounds, it will be inappropriate to state that payback is a valid approach of investment appraisal, yet it fails to consider the total return and time value of money. Even though skipping such factors makes it a simple investment appraisal technique, it is important to note that failure to incorporate such elements is like ignoring qualitative facets of investment decisions, which may not create a good investment decision. According to (McLaney&Atrill,2020), investment engrosses making a layout of something of economic significance such as money at one point in time, which is anticipated to yield a profit to the shareholder at some points in time. This makes time an essential feature of an investment decision. Therefore, payback cannot be a valid investment appraisal method without considering the time value of money.
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