An evaluation of the investment appraisal practice in the Namibian banking industry.

Abstract

The study examines the investment appraisal practices in the Namibian banking industry. It focuses on how the banks perform an investment appraisal, subsequent follow- up and measurement of project failure or success. The results reflect that both centralized and decentralized project decision making are practiced in the industry. Banking institutions have a tendency to use a single investment appraisal technique, mostly a discounted cash flow (DCF) model. They apply uniform appraisal techniques throughout the project life cycle. It was noted that firms apply a constant cost of capital across time and projects. The average cost of funds is found to be the main determiner of the companies' cost of capital. The firms pay attention to project risks and use financial measures to determine the project's success or failure. The alignment of the appraisal techniques used with the overall organization objectives was considered to be crucial in the banking industry. The paper was concluded on the note that the use of traditional investment appraisal techniques is far from over.s the investment appraisal practices in the Namibian banking.