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Financial Appraisal Methodology

The approach to financial appraisal calculates the following key indicators to assess the quality of the investment: Net Present Value (NPV), Internal Rate of Return (IRR), Break-even (B/E) and Payback Period. The cash flows for Y1 through Y4 show the initial or 'baseline' assumptions of capital, revenue and expenses. It is intended to provide information such as: (i) when there will be insufficient cash to run the firm (liquidity risk): (ii) whether profits are high, low or negative (profitability); (iii) time and number of units sold to break even (B/E); (iv) time to recover the invested capital (Payback Period).



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