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Investment Analysis Guidelines for Manufacturing
This Guide provides methods to assist manufacturers of any size in making investment decisions for capital and processes. It also provides a reference for economic decision making (e.g., selecting projects with the best economics). This Guide is not a comprehensive review of investment decision making but rather focuses on methods that manufacturers and their staff can readily apply to economically advance manufacturing operations. The methods discussed address four decision types and include net present value, internal rate of return, and payback period. Approximately 75% of Fortune 500 companies indicated that they use net present value for most project decisions (Graham and Harvey,2001). For the internal rate of return, 76% indicated that they use it most of the time and payback period is used by 57% most of the time (Graham and Harvey, 2001). This Guide also discusses rate of return for short-term projects as well as depreciation.
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