AN EVALUATION OF INVESTMENT APPRAISAL
AND ITS APPLICATION TECHNIQUES IN A
MANUFACTURING INDUSTRY
(A CASE STUDY OF INNOSON NIGERIA LIMITED)
ABSTRACT
This study examines the evaluation of investment appraisal and its application techniques in manufacturing industries with INNOSON GROUP NIGERIA LIMITED as my study reference. A survey design approach was adopted for the study, which involves the filled survey of fifty (50) copies of questionnaires to randomly selected respondents but forty-five (45) was retuned. Two hypotheses were formulated and tested in the course of this study. Both primary and secondary source of data were used for the study. The primary data included questionnaire distribution and oral interview while secondary data included journals and internet materials. Data collected were analyzed using simple table while the hypotheses formulated were tested using chi-square methods. The major finding of the study is that investment appraisal and its application technique in manufacturing industries turns to be a great advantage and importance in investment decision. The study recommends among other things that manufacturing industries in Nigeria should be encouraged to perform one or more rational investment appraisal before embarking on a project of any size.
TABLE OF CONTENTS
Title Page i
Approval Page ii
Dedication iii
Acknowledgements iv
Abstract v
Tables of Contents vi
CHAPTER ONE
1.0 INTRODUCTION
1. 1 Background of the Study 1
1.2 Statement of the Problem 2
1.3 Objectives of the Study 3
1.4 Research Questions 4
1.5 Statement of hypotheses 5
1.6 Scope of the Study 6
1.7 Significance of the Study 7
1.8 Definition of Terms 7
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Preamble 9
2.2 The Need for Investment Appraisal 10
2.3 Analysis for Investment Decision 12
2.4 Some Forms of Investment Decision 14
2.5 Investment Appraisal and its Application
Techniques 15
2.6 Risk and Uncertainty in Investment 36
2.7 Method of Risk Measurement 38
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 Research Design 53
3.2 Area of the Study 54
3.3 Population of Study 55
3.4 Sources of Data 55
3.5 Sampling Method 56
3.6 Research Instrumentation 57
3.7 Validity and Reliability of Research Instruments 57
3.8 Method of Investigation 57
CHAPTER FOUR:
4.0 PRESENTATION AND ANALYSIS OF DATA
4.1 Presentation and Analysis of Data 58
4.2 Test of Hypotheses 63
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION
AND RECOMMENDATION
5.1 Summary of Findings 71
5.2 Conclusion 73
5.3 Recommendation 74
5.4 Implication of the Finding 75
5.5 Suggestion for the Further Studies 75
5.6 Limitation of the Study 76
Bibliography 78
Appendices 79
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Modern time cal1s for efficient al1ocation of resources by the management of any organization. The survival and growth of any organization makes profitability an indispensable element in the operation of a business organization. This function thus, involves the firm’s decision to commit its limited funds in long-term assets and other profitable activities with a view to earning a stream of income over a period of time in the near future.
Investment appraisal decision in any organization is always handled with an utmost care. This is due to the fact that the fund available to the business organization is limited.
Thus, in view of the strategic importance and the nature of investment decision, there is need for a critical analysis and appraisal on investment opportunities before the commitment of the scarce resources to it with the aim of maximizing return.
Hence, by investment appraisal and its application techniques refers to those traditional and scientific tools that management of a business organization makes use of as a guide in investing into viable and lucrative investment opportunities.
1.2 Statement of the Problem
The choice of best investment opportunities no doubt accrues a lot of benefit to an organization. The stream of income over a period of time is essential for profitability purpose, which has the potential to intensify the survival and accelerate the growth of the business organization with a resultant increase in the wealth of the owner.
From another perspective, a wrong choice of investment opportunity due to inability to appraisal it critically in terms of outcome, cash profile and so on will not only regard the growth of the business organization but might make it die prematurely.
This research work is therefore meant to provide solution to know the scope and application of investment appraisal and its application technique, be it investing in existing or new business.
1.3 Objectives of the Study
To find out the extent to which the manufacturing industry apply investment appraisal and its application techniques in their investment decision
Examining the effect of application of investment appraisal on the success of manufacturing industries
Examining the comparative advantage that the decision makers will derive and disadvantages that they may likely encounter in the course of appraising investment and its application techniques.
To ascertain the duration in making use of investing appraisal techniques.
1.4 Research Questions
The research questions to be considered in this study are as follows:
1. What are the relevance of investment appraisal and its application techniques?
2. What are the achievement of pre-determined goal using investment appraisal and the application techniques?
3. The effort of political and economic reforms in Innoson Nigeria Ltd.
4. What are the durations in making use of investment appraisal techniques?
5. What are the initiators of capital investment proposal in Innoson group Nigeria Ltd?
1.5 Statement of Hypothesis
The researcher developed the following research hypothesis:
Ho: Manufacturing industries does not make use of investment appraisal in investment decision making?
H1: Manufacturing industries makes use of investment appraisal in investment decision making?
Ho: The application of investment appraisal techniques does not have any impact on the success of manufacturing industries.
H1: The application of investment appraisal techniques has significant impact on the success of manufacturing industries.
1.6 Scope of the Study
This research work is done to access the effectiveness of investment appraisal and its application techniques. This work covens only some issues, analysis and capturing impact of investment appraisal to management of manufacturing industries.
1.7 Significance Of The Study
The significance of this study is to help those who will find this project work more meaningful as related to investment appraisal and its application techniques.
The study will also emphasize in its ability to unveil the benefit of their usage to shareholders, managers, government and need to adopt a more rational approach to investment decision situation rather adhering to the traditional method which is more or less “rule of thumb” before committing the scarce resources to a decision which once taken and committed is irreversible.
1.8 Definition Of Terms
Below are some definitions of terms used in the study
Investment: Committing funds to project with a View to earning an acceptable stream if income in the future.
Examples include investments in bonds and securities and purchase of assets for company operation.
Appraisal: Critical evaluation of the cost of an investment proposal vis-a-vis the benefit in the future
Application Techniques: Tools for appraising investment opportunities.
Investment Decision: One of the most importance areas In which interest plays a role is where decision has to be made whether or not to invest business funds.
Interest: Charge for borrowing money or the return from lending it or cost of using the lent money.
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