Citation:

Abdul Khaliq M. Usodan, Faisah D. Hadji Jalal, Abdani D. Bandera, Omaimah M. Usman-Macadaag. "Making the Right Choice: A Literature-Based Analysis on Investment Appraisal" International Research Journal of Economics and Management Studies, Vol. 4, No. 11, pp. 94-100, 2025. Crossref. http://doi.org/10.56472/25835238/IRJEMS-V4I11P113

Abstract:

Investment appraisal is a fundamental component of business, entrepreneurship, and public sector planning that provides an organised approach for assessing whether or not the more than adequate returns will compensate for the resources deployed. This literature review provides an overview of the study area since it contains traditional and modern investment appraisal techniques, as well as behavioral and cognitive effects, along with emerging themes related to sustainability and technological advancement. Conventional methods like the Payback Period and Accounting Rate of Return still provide pragmatic reference points, especially for small or under-resourced companies. Advanced discounted cash flow models, including but not limited to Net Present Value, Internal Rate of Return, and the Profitability Index, offer a more precise, value-based decision process by accounting for the time value of money and referencing investments to long-term corporate priorities. The Real Options Approach is even more interesting in that it accounts for managerial flexibility to respond to investment decisions to changing market conditions, technological improvements, and regulatory uncertainties. Behavioral finance views suggest that cognitive biases such as overconfidence, anchoring, herd behavior, and loss aversion heavily impact investment decisions, and accordingly, there is a requirement for structured decision-making frameworks, peer review methods, cross-functional assessments, etc. Furthermore, where the firm has also embraced ESG (Environmental, Social and Governance) principles and Triple Bottom Line methodology, this would represent a shift in the accepted means of investing appraised by more than just financial return. The integration of traditional finance literature, contemporary analytical techniques, behavioural perspectives, and sustainability focus suggests that informed investment appraisal is multi-faceted, strategic, and ethical. This same message is emphasized in this study that organizations, especially SMEs and public sector entities in emerging markets, could improve the quality of decision-making as well as long-term value-creating outcomes through the adoption of an integrative evidence-based framework for investment evaluation, thus helping the quest to get your investment choice right amidst complex, uncertain, and quickly changing environments.

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Keywords:

Behavioral Finance, Capital Budgeting, ESG Investing, Internal Rate of Return (IRR), Investment Appraisal, Net Present Value (NPV), Payback Period, Real Options.