Dissertation Proposal 1

Dissertation Proposal

How can IRR help to determine the risk of choosing between two investments? The payback time

period is also known as the problem solver in decision making. Evaluate

[Name of the Student]

[Name of the instructor]

[Date]

Dissertation Proposal

Title

How can IRR help to determine the risk of choosing between two investments? The

payback time period is also known as the problem solver in decision making. Evaluate

General description of the project

 Dissertation Proposal 2

The entire project would be based on the financial measures taken by organisations when

they are planning to invest in different projects. Different capital budgeting instruments and

methods will be used in this research. However, emphasis would be laid on core financial

instruments which are known as internal rate or return and the pay back method. Similarly, the

core aspect that would be discussed in this research is that how these methods are used by

different organisations to evaluate the factor of risk in different investments.

. .. . . . . . . . . . . . . . . .

Background

Organisations are enlarging their visions and with the advent of time they have

transformed themselves into big powerhouses that possess immense power to influence different

stakeholders that are present in a society. These organisations invest their reserves in different

ventures to earn more and more profit so that they can be successful in both the short and the

long run (Siegel 2007). Investments are actually associated with the scenario that they are a

commitment of money to purchase financial instruments through which profit can be attained.

Usually companies invest in different ventures like property, commodity, stocks, bonds

derivatives etc. However, it can be said that the purpose of these financial instruments is to earn

profit and maximise the financial strength of the company (Mayo 2006). Furthermore,

investments are associated and treated as financial elements that are dealt by financial analysts

and accounts so that they can be utilized in the best possible way. However, a broader of

investments depicts that certain element of risk is always associated with investments and

financial analysts opt for different methods so that they can curb the risk of financial investment

in an organisation (Melicher and Norton 2008). . . . . . . . . . . . . . . . . . . . . . . . . .

Literature Analysis
 Dissertation Proposal 3

Investments appraisals or capital budgeting methods are important aspects when it comes

to minimizing the risks associated with the investments. The core aspect that is discussed in

capital budgeting is of project selection and how organisations select an investment project when

they have several options (Seitz and Ellison 2004). The main aspects of investment appraisals are

Internal Rate of Return (IRR) and Pay Back.

Internal rate of return (IRR) methods calculates the discount rate at which an investment present

value of all the expected cash flows equals the present value of its cash flows that are expected.

In simple terms it can also be said that IRR can be calculated when the Net Present Value of an

investment option is actually zero. It is also known as the amount of profit an individual gets

when they invest in a certain project (Peterson and Fabozzi 2002). However, IRR is calculated in

percentages but in order to evaluate the risks factor in an investment it can be considered as one

of the most feasible options. Besides that it can be said that another method that is equally

important in this regard is that after how much time an individual or an organisation would get

back its investment. Through number of years an individual or an organisation can easily

calculate the element of risks involved in an investment (Dayanada, Irons, and Harrison 2008).

Therefore, it can be said both these methods are quite important in gauging the risks that is

associated when organisations are selecting projects. . . . . . . . . . . . . . . . . . .

Objectives

The objectives of the current research will to evaluate that what are the risks associated

with investments and how IRR and other capital budgeting methods like Pay Back approach

minimizes that risks. The objective of the research is a bit narrowed as it would focus on a

scenario that how an organisation picks up a project when they have to choose between two. The

research would look for empirical evidences and analysis of different organisations will be
 Dissertation Proposal 4

presented in this research. . . . . . . . . . . . . . . . . . . . . .

Research Methods

Research methods are of utmost importance when we have to evaluate or test a

hypothesis. The approach that will be used in this research would be based on deducting

reasoning. Two broad methodologies of research will be used in this research project which is

known as qualitative and quantitative approach. However, emphasis will be laid on quantitative

approach. However, case study approach will also be used in this research project. . . . . . . . . . . . .

..............................................

The data that will be analysed in this research would be collected from both primary and

secondary sources. The primary data analysis would focus on questionnaires and analysis of

these questionnaires will be used in this research. However, secondary sources would incorporate

case studies of different organisations that are using these techniques to evaluate the risks of their

investments.

Schedule

Key Activities Time-Scale

Chapter:1 Introduction One week

Chapter:2 Literature Review 2 weeks

Chapter:3 Research Methodology 2 weeks

 Dissertation Proposal 5

Chapter:4 Findings and Analysis 2 weeks

Chapter:5 Conclusion 1 week

References

Dayanada, D., Irons, R., & Harrison, S. (2008). Capital Budgeting: Financial Appraisal of

Investment Projects . Cambridge University Press .

Mayo, H. (2006). Basic Finance: An Introduction to Financial Institutions, Investments and

Management . South-Western College .

Melicher, R., & Norton, E. (2008). Introduction to Finance: Markets, Investments, and

Financial Management . Wiley.

Peterson, P., & Fabozzi, F. (2002). Capital Budgeting . Wiley.

Seitz, N., & Ellison, M. (2004). Capital Budgeting and Long-Term Financing Decisions . South-

Western College Pub.

Siegel, J. (2007). The Definitive Guide to Financial Market Returns & Long Term Investment
 Dissertation Proposal 6

Strategies. McGraw-Hill.