An investment is an investment of money in a business with the aim of further making a profit. As a rule, the investor seeks to obtain as much information as possible about the project. It is for this purpose that the investment appraisal is carried out.
Investment appraisal is the study and analysis of the project, determination of cost and economic efficiency. This procedure is carried out when searching for new investors, when insuring risks, and an analysis is carried out in the event of the development of any investment project. The assessment can be carried out according to several factors, for example, the value of investments in the market is estimated, that is, according to the market value. The project can be assessed by a new shareholder, as well as a leasing company or bank, for example, in the case of a loan. In some cases, the government resorts to evaluating investments of private enterprises, for example, when financial support is planned. The state often finances agricultural enterprises. Who analyzes the investment project? For this, there are special companies with appraisers on their staff. Some large organizations employ a professional who constantly evaluates and analyzes the financial market, monitors the cost and profitability of the project. All data is recorded and provided to the head, who further attracts investors. There are indicators by which investments are assessed: - profitability index - shows the effectiveness of the project. To calculate it, you need to divide the real value of cash flows by the sum of all investments; - the payback time - shows the minimum time after which the investment will bring the desired income; - the internal rate of return - shows the discount rate (rate of return) at which the cost of income from investment is equal to the amount of funds invested in the project; - net present value - shows the amount of expected income from the project, which is reduced to the initial point in time.
