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PROJECT TOPIC: THE SIGNIFICANT OF INVESTMENT APPRAISAL TECHNIQUES TO MANAGEMENT DECISION MAKING (A CASE STUDY OF UNITED BANK OF AFRICA)

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CHAPTER ONE

1.0           GENERAL INTRODUCTION OF THE RESEARCH

1.1 INTRODUCTION        

In a modern economy, there are varieties of different enterprises, varying in size from a single entrepreneur to the multinational corporation in an activities methods of finance form of organization marketing strategies and so on. However, all these entrepreneur have one basic aim which is to utilize resources to best achieve the firm goal or objectives. The word ‘firm is used in a general term to encompass the decision making unit which is engaged in the transformation of input into outputs.

The investment decision of the firm is generally known as capital budgeting or capital investment decision. Investment decision are those decision that involve current outlays in return for a stream of benefits in future years. In another word, investment decision include the firms decision to put its current fund in the longterm assets in anticipation of an expected flow to benefit over a series of years;

The firm’s investment decision will include expansion, acquisition, in organization and replacement of the longterm assets decisions, other activities like research and development, advertisement, change in method of distribution and so many also be evaluated as investment decision thus investment in fixed and current asset is one single activity.

Capital investment decision normally represent the most important decisions that a bank makes because, a substantial proportion of a bank product are committed to action that are likely to be irreversible and this also make it imprerature for the banks to plan its investment programmes very carefully.

Business firm invest hundred of billions of naira each year. A good decision can boost earing sharply and increase the price of firm stock while a bad decision can lead to bankruptcy such decision are applicable to all sector of the economy, either public or private sector which includes the banking industry.

Capital investment decision is the most crucial and most important of the three decision when it come to the creation of value. In other words investment decision normally represent the most important decision that an organization makes, since of commit a substantial percentages of its resources to action that are likely to be irreversible.     

It is important to appreciation that there are number of criteria that could be employed in making management decision but the significance of investment appraisal technique in decision making cannot be over emphasized.

Investment appraisal techniques serve both financing and investment decision. There is a need to look at the various alternative available and choose that will yield highest.

1.2           STATEMENT OF RESEARCH PROBLEM

The research is carried out with a view to testing the effectiveness of investment appraisal techniques in management decision making, many desirable investment project are not undertaken as a result of shortage of funds leads to capital rationing in many project with positive NPV are rejected (Net Present Value) this is the method of evaluating the investment proposals.

1.3           OBJECTIVES OF THE STUDY

                The study is aimed at providing general preview of investment decision making processes in banking industry. This entails how the project are initial analysed.

                Another objectives of the study include

  • To ascertain the significance of investment appraisal techniques.
  • The tax implication on investment appraisal and risk, uncertainly on investment appraisal.

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