CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

Probably amongst the most crucial decision facing management today are those concerned with capital investment. Typical of these decisions are those related to expansion through adding of new product lines, factory extension for extension in new sales entries. The significance of a decision of this nature is obvious since based on the decision made, the firm will find itself, committed to a pattern of activity and expenditure that will continue for some time into the future due to huge capital outlay involved.

Uncertainty with respect to the future is considered in any investments decision but the further into the future its efforts are projected, the greater the degree of that uncertainty.

Management appraisal involves the generations of investment proposals, the estimate of cash flow for the proposal, the evaluation of cash flow, the selection of project based upon an acceptance criteria and the continuance re-evaluation of investment project after their acceptance (Home et al 1983).

How high a proposal must go before it is finally approve depends upon how large the capital outlay is the greater the capital outlay, the greater the number of evaluations that may be the required. The object of any system of project evaluation is to be able to compare the profitability of a series of funds usage. Each project will require the use of volume of the firms fund for varying periods and will also provide for the returns of those funds together with an element of profit. The appraisal system should be able to take both of these factors and by comparing them, calculate a comparable rate of return.

It is in this regard that this essay seeks to analyze the role of investment appraisal of small business in Nigeria. This essay will also seek to evaluate and carryout an investment appraisal of small business in Nigeria.

​1.2   Statement of the Problem

1.3   Objectives of the Study

1. To investigatethe investment appraisal of small scale businesses in Nigeria.

2. To determine the nature or outlook of investment appraisal of small businesses in Nigeria.

3. To know how investment appraisal of small businesses in Nigeria is of benefit to both prospective investors and the country in general.

1.4   Research Questions

1. Is investment appraisal beneficial to small businesses in Nigeria?

1.5   Research Hypotheses

H0: Investment appraisal is not beneficial to small businesses in Nigeria.

H1: Investment appraisal is beneficial to small businesses in Nigeria.

1.6   Significance of the study

This essay work will be beneficial to the government because efficiency in small business operation will be achieved with high profit thereby entailing more income available for taxation.

          Small business operation will enjoy the advantages of new accurate determination of the state of affairs of their organizations. The research work will broaden the idea and knowledge of the entire developing countries of the usefulness by examining impartial views about the methods and making generation based upon through view of all relevant issues thereby clearing point of doubts earlier conceived.Besides, the researcher hopes that the answers obtained will add an insight to the problems of investment appraising of small scale business in the country and will also serve as a good stepping stone for subsequent researchers in this field of study.

1.7   Scope of the study

This study focuses on the techniques for assessing the durability of small scale business opportunities.Tanterlizer in Uyo is used as the case study for this research.

1.8   Limitations of the study

The subject of investment appraisal of small business has not yet enjoy tremendous boost in this country. It is on this premises that we lack books for our literature review and what is more, the few ones we got are written by foreign authors whose tax system differs from that of our economy. Also the lack of time is one of the limitation factors.

1.9   Definition of terms

Business:A person's regular occupation, profession, or trade.

Small Scale Entrepreneur: is abusiness that employs a small number of workers and does not have a high volume of sales.