INVESTMENT APPRAISAL TECHNIQUES AND DECISION MAKING PROCESS

Investment appraisal techniques and Decision making process

Abstract

As textile and apparel companies operate in an interconnected world economy, the new challenge for these companies is to manufacture and market innovative products while considering the entire world as the playing field. Today, the ideal global corporation exploits every new opportunity in the environment, controls every threat that may occur, and creates effective strategies to stay competitive. Often, competitive advantages are established by using by comparative advantages, however, this process requires a vast amount of decision-making and capital. Although companies are investing their time and money, there always exists the possibility of ultimate failure due to long term and short term uncertainty in the environment.

Many companies fail to realize the full potential of their foreign investments because they lacked a structured decision-making methodology for international investments. The complexity of the global environment is evolutionary due to new laws and regulations. For example, major Pakistani textile company “Gul Ahmed Textile Pvt Ltd”, experienced investment failures in Karachi, while taking advantage of the regulations. Although failures were experienced when investments were made outside of the home country, it is also clear that staying in one's home country is not automatically the right decision for all types of the textile companies. Failures in international investment decisions have shown that there is an absence of a dimension to address the qualitative aspects of the decision-making process.

Table of Content

CHAPTER ONE7

INTRODUCTION7

Introduction & Background7

Introduction to the Company9

Purpose of Dissertation10

Aims and Objectives11

Structure of the Dissertation11

Background of Investment Appraisal13

Significance of the Study19

Limitations of the Study20

CHAPTER TWO25

LITERATURE REVIEW25

Financial Decisions25

Stage 1: Determine Investment funds available26

Stage 2: Identify profitable project opportunities26

Stage 3: Refine and classify the proposed projects.27

Stage 4: Evaluate proposed project(s)27

Stage 5: Approve Project(s)27

Stage 6: Monitor and control project(s)28

Types of Investments29

Expansion or Diversification Investments29

Cost Saving Investment30

Safety and Maintenance Investment30

Large Scale Investment31

Investment Appraisal31

Investment Appraisal Techniques33

Net Present Value33

Payback Method35

Multilevel Decisions38

Multi-periodic Decisions39

Current Methodologies40

Scaling, Scoring, and Ranking40

Analytic Hierarchy Process (AHP)44

Mathematical Programming45

Heuristic Algorithms49

Organisational learning in Gul Ahmed Textile Mills67

Advice from key employees71

CHAPTER THREE77

METHODOLOGY77

Research Design77

Instrument Development78

Data Collection78

Data Analysis80

CHAPTER FOUR81

RESULTS AND ANALYSIS81

Sample Description81

Results81

Survey Results83

CHAPTER FIVE87

DISCUSSION AND CONCLUSION87

REFERENCES116

Chapter One Introduction

Introduction & Background

Every organization in this world have some objectives or goals which are likely to be maximize the shareholder value with best quality production or best quality services in order to achieve customer loyalty and make the world better place. To achieve those objectives which may need any finance or investment decision to expect which improve the shareholder's value. But besides all these there are some other non-financial goals exist for every organization to measure its success.

So most of the organization goals are to raise the capital and generate profit by growing business which needs an investment. According to Neale & Pike (2006) investment and financing decision are mostly concerned of financial managers. Investment decisions also known by capital budgeting decisions which means to acquire some assets and employ them within the business to produce goods or services. While Neale & Pike (2006) suggested that financing decisions are mostly related with funding in ...