CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Investment is the process of obtaining title deed to an asset such as financial asset or real asset for the purpose of receiving returns form the assets. Investment appraisal determines whether or not new investment or projects should be undertaken. Project Evaluation is the process by which management plans analyses and control organizations investment. On the other hand, investment decision is technique that can be applied to any type of investment made by (individuals or companies) where the financial implication can be identified. Decision making cannot be said to be alien to managements, Infact, it is as primitive as the existence of human organisms, since a choice has to be made among alternatives (opportunity cost concept) due to scarcity of resources There are basically three major level of decision namely strategy decision, tactical decision, Operational decision, each of these decisions are taken at different hierarchy of the organization. Having recognized the need of defined organization structure especially with the advancement of technology and industrial revolution occasional by rapid economic growth, different organization have deemed it fit to specify their aims and objectives in order to achieve the organizational goals. Such organization objective there exits investment decision making which is aimed at selecting the investment project that will maximize the shareholders’ wealth. Project appraisal will be incomplete without looking at the basis stages project has to go through, in relation of the project cycle in order to search through the project identification and definition, project preparation, Project analysis, project implementation and the evaluation techniques. The traditional view of investment appraisal is on the old method which does not consider the time value of money and it is fraught with some difficulties which are peculiar to it. Such method includes: Pay Back Period (PBP) Method. Average profit or Accounting Rate of Returns (ARR) Method. The sophisticated method is also called the scientific or discounting methods incorporated the time value of money into its analysis, thereby making them to be more acceptable since they also take account of variables, having critical impacts on investment decisions. Net Present Value (NPV) Method. Profitability Index (PI) or benefit cost ratio Method. Internal rate of return (IRR) Method. However, investment appraisal under condition of risk and uncertainty shall also be looked into with reference to the following techniques. • Time based Method Probability based technique Sensitivity analysis and Simulation techniques. In an attempt to round off this research, the important of project implementation evaluation will be summarized in order to identify the various quantitative and qualitative factors which might affect the company’s decision making so as to carry out the control function and suggest corrective measures in order to forestall negative interference in the company’s investment project decision making process in the future.