This is the analysis done to consider the profitability of an investment over the life of an asset alongside considerations of affordability and strategic fit.
Investment appraisal is an input to the investment decision which is the decision made by the sponsor and governance board that justifies the investment in a project, programme or portfolio.
It provides the rationale and justification for spending limited resources and relies on a robust investment appraisal.
Investment decisions balance a number of elements including:
Affordability:
Can the benefits be delivered within the available funds of the organisation when viewed as part of the wider portfolio of operational and change activities?
Return on investment (ROI):
Does the investment deliver a suitable return, given the forecasted capital and operational costs and benefits over the economic life of the product. Is this the best way to get a return on the investment of funds?
Portfolio effect:
Does the investment fit alongside the wider set of investments in operational and change activities?
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