Investment, appraisal

Reul, R. I., Which Investment Appraisal Technique Should You Use, Chemical Engineering, April 22, 1968, pp. 212-218. 

E. L Gaden Jr., AIChE Symposium Series (American Institute of Chemical Engineers), 87 (285), Investment Appraisal for Chemical Engineers.), 73-79 (1991). 

The additional capacity needed does not require construction of one or more new plant(s) but can be achieved by expanding existing plants. Consequently, the solution space is limited to the value chain s existing production network and the plant most suitable for expansion has to be identified. In this case the plant to expand can often be selected based on investment appraisal calculations without a complete network design project. 

For an overview of investment appraisal calculation methods see for example Gotze and Bloech (2002) or Perridon and Steiner (2006). 

A major part of the investment appraisal exercise is the calculation of the total amount of capital needed ... 

Capital cost estimation is an essential part of investment appraisal. Many types of capital cost estimates are made, ranging from the order of magnitude to detailed estimates requiring the collection of accurate technical data. The American Association of Cost Engineers defined five types of cost estimates as follows ... 

This method of investment appraisal recognises the time value of money (91p today will be worth 1 in a year s time if the rate of interest is 10%). Clearly, over the duration of a five-year project, the cost of capital, and... 

Easy to understand and communicate, payback analysis is a method of investment appraisal that calculates the time taken to repay the original capital outlay. Slightly nonsensical, it ignores returns after this point in time, and fails to account for the time value of money. It can, nevertheless, prove useful in fast-moving industries (computers), as it is often vital to recoup investment in a short space of time. 

It is important that formal investment appraisal procedures and investment poU-cies are in place. However, the rate of discounted cash flow (DCF) yield should vary according to the type of investment as indicated in Table 17.5. 

These concerns too will influence thinking on public transport investment appraisal in due course since, as has been argued by many for so long, it is essential that there should be a level playing field on which investments between alternative modes are considered. While the established practice is to add induced trips into a rail project appraisal as an added gain, it would be argued by some that these additional trips are undesirable. 

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