FREE online courses on Investment Appraisal - Investment Appraisal - Investment Appraisal - Methods And Considerations - Evaluating Alternative Proposals

 

The selection of a particular proposal should follow a careful appraisal of both alternative uses of funds and alternative means of performing a particular project. For instance, a company may wish to double the capacity of its production line, and determine three means of accomplishing this, namely;

• Introduce double-shift working;
• Install a second production line; or
• Scrap the existing production line and build a new line with double the initial capacity.

 

The choice of a particular alternative will depend on how it accords with the firm's established investment objectives, and the choice of projects will depend on both corporate objectives and the availability of funds. But the fact remains that if the most advantageous alternative has been overlooked; no amount of technical evaluation and appraisal can overcome this basic omission.