Abstract

One of the most significant strategic decisions that businesses in all sectors must take is to allocate scarce investment resources amongst projects and in order to take advantage of today’s constantly changing market opportunities, a solid defense mechanism has to be put in place among which is capital investment techniques.

However, Capital investment techniques are probably the least understood tools of management and as a result, one of the least used by small businesses.

It is against this background that this research aimed at examining the effects of investment appraisal techniques on the profitability of small and medium-sized farm businesses was undertaken.

The main source of data collection was primary data and the technique of data collection was a closed-ended questionnaire with the tool of analysis being simple descriptive tools like percentages, and tables as well as inferential tools like linearized multiple regression.

Analyzed using SPSS, demographic findings revealed that the majority of the small and medium-sized farm businesses operate on a small scale.

Besides, Small and medium-sized farm businesses effectively used discounted payback, net present value, and internal rate of return and as well as the average rate of return and payback period appraisals techniques.

In respect to the relationship between appraisal techniques and viability, with viability captured from the farmer ability to make a profit; we observed that discounted payback and average rate of return were found to have an insignificant positive relationship on small and medium-sized farm business viability, while Net present value had a significant negative relationship on small and medium-sized farm business viability.

Payback period and internal rate of return techniques were found to have a negative and positive insignificant relationship on small and medium-sized farm business viability respectively.

Overall, investment appraisal techniques were found to have an insignificant effect on the viability of small and medium-sized farm businesses in the Buea municipality.

More so, sophisticatedness, high cost of adoption as well as lack of proper awareness were found to be difficulties faced in adopting appropriate appraisal techniques.

It was therefore concluded that farm businesses should not relent their effort in adopting appraisal techniques as the insignificant effect could have been caused by the challenges faced in adopting them.

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