Explain the methods of evaluating international investment decisions
Answers
Explanation:
. 1. Urgency Method:
In many situations in the life of a business concern an ad hoc decision is needed in respect of an investment expenditure. For instance, if a part of machine stops working leading to complete breakdown and disruption in the production process, it will be justified to replace it immediately by new one even without comparing the cost and future profit. Any decision on investment expenditure on the basis of urgency should be taken only if it is fully warranted and justified.
2. Pay-Back Period Method:
This is also known as ‘payoff and pay out’ method. This method is employed to determine the number of years in which the capital expenditure incurred is expected to pay for itself. This method describes in terms of period of time, the relationship between cash inflow and total amount of investment.