Whereas appraisal is generally referring to enquiring into the worthlessness of a prospective capital investment, evaluation refers to rigorously checking for the realised worthlessness after the investment has been made; however, evaluation is just used to refer to enquiring into the worthlessness both before and after the investment has been made. In this study, both terms are used interchangeably for both pre-, and post-, investment computations for the economic costs and benefits of any capital investments.
Though time value of money has to be taken into account in all cases, yet what are called Traditional methods do not consider the time value of money. As has been mentioned in Sections finding the time-adjusted value as at an earlier instant is called "discounting" and as at a later instant is called "compounding". Based on this, methods based on adjusting for time-based values of costs and benefits are generally called Discounted Cash Flow Techniques.
Traditional methods include Pay Back Period method; and Average Rate of Return method. Discounted Cash Flow Technique include : Net Present Value method; Internal Rate of Return method; Annual Equivalent method; Net Terminal Value method; Benefit Cost Ratios or Profitability Indices. Of these, NPV, IRR, AE and BCR methods have already been dealt with in Unit 15 and in the earlier sections in this unit. If rather than finding the NPV at the initial date of the project, the cumulative inflow duly (i.e. even admitting variable rates of interest over the years) compounded, as at the terminal date of the project be computed, and then discounted to the zero-date, that becomes the NTV method. This needs additional information on how the cash flows are to be compounded or made cumulative at the terminal date through interest rates for reinvestment. This is not discussed further in this study. However, some important points regarding the methods already dealt with will also be brought forth herein.
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