Table of ContentsExecutive Summary…………………………………………………………….…2Investment Appraisal Techniques investments…………… ……………………………………..2Reimbursement……………………………………………………………………… ….3Accounting rate of return (ARR)……………………………………………..…4Net present value (NPV)……………………………………… …………… …….5Internal rate of return (IRR)…………………………………………………….6The decision to use investment appraisal………… ……………………… ……….7Conclusion…………………………………………………………………………………………….7References…………… ……………………… ……………………………………….8Executive SummaryIn this assignment, four widely used investment appraisal techniques will be presented. They are all unique in their own way in today's financial world. Investment Evaluation Techniques Payback is a simple technique for evaluating an investment based on the length of time over which it could be repaid. This has always been the default option for small businesses and those most keen to focus on cash flow rather than just profits. The accounting rate of return (ARR) compares the profit you expect to earn from an investment to the amount you need to invest. ARR is often calculated as the average annual profit you expect over the life of an investment project, compared to the average amount of capital invested. Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of a planned investment or project. Internal rate of return (IRR) is a metric applied to measuring capital for earning potential investments. The internal rate of return is a discount rate that makes the NPV of all cash flows from a particular project equal to zero. IRR calculations are based on the same formula as NPV.Payback - Benefits of PaybackThe pa...... middle of paper ......fastest return or gives you the highest annual rate of return. RisksA good assessment takes into account the risks of things going wrong. If a company files a patent infringement lawsuit, ask yourself what will happen if the company loses the case. If the business strategy is built around patents, this can increase the level of risk beyond what you can accept. Other uncertainty factors include winning a government contract, a land deal falling through, or the possibility that some key company personnel will leave the company. If the risks are high, they may outweigh the potential rewards. ConclusionReturn on investment, accounting rate of return (ARR), net present value (NPV) and internal rate of return (IRR) are very important in terms of calculating an investment valuation. Each of them has a different type of characteristics and is suitable for everyone who is interested in investing..