Investment appraisal techniques

Investment appraisal techniques rely on accurate calculations to come up with useable answers. Although some of these calculations can be complicated, modern spreadsheet software can help you process them.

For example, a typical spreadsheet package includes functions that can calculate net present value or internal rate of return.

Crucially, an effective appraisal relies on putting in the right figures. For example, the timing of cashflows can have a significant effect on how attractive an investment is. You may also need help dealing with more complex issues, such as the tax implications of different forms of financing.

You may want to ask your accountant for help and advice, particularly if large amounts of money are involved - see choose an accountant for your business.

If you use specialist accounting software, it can help you manage accounts more efficiently by making the process quicker and more straightforward - see accounting software.

If outcomes cannot be predicted with certainty, you may need to test what would happen in a range of different scenarios. For more information see investment risk and sensitivity analysis.