What is an investment appraisal?


Quick Answer

An investment appraisal is when someone appraises a potential investment in an attempt to determine a possible return. This is quite common and, although should be done professionally, those people with a business background can do it themselves easily.

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Full Answer

Investment appraisal is performed by anyone who actually wants to ensure his return on an investment is worth the initial investment. By hiring an investment appraiser, investments can be determined if they are a worthy choice as far as making money.

An investment appraiser knows that checking for the rate of return is very important, as this controls the entire investment. The rate of return is what gives the investor a return. For example, if the initial investment is $1,000 and the rate of return is 2 percent, then the investor can count on 2 percent increment returns on investment. This can mean until the investment is paid off, or a longer time period, dependent on the original investment agreement. The payback period for this investment is also important, as the length of time can play a significant part in whether an investment is actually performed. Assessing the risk of the investment is one of the most important appraisal techniques that can be done. Assessing the risk will let a potential investor know if the investment is actually worth investing in, or if it will be sinking money into something that will not have a good return.

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