3.8 Investment appraisal (some HL only) Flashcards
1
Q
Investment
A
Business expenditure on fixed assets with the potential to generate future financial benefits
2
Q
Investment appraisal
A
A quantitative decision-making tool used to assess and justify the capital expenditure of a firm in terms of whether it will be financially worthwhile.
3
Q
Payback period formula
A
Cost of the investment / Annual net eash flow
4
Q
Average rate of return (ARR) formula
A
Average annual profit/ Initial investment
5
Q
Net present value (NPV)
A
Calculate the real value of an investment project by discounting technique that calculates the real value of an investment project by discounting the value of future cash flows.
