investment appraisal

Question 1

payback period (PBP)

Answer 1

the time it takes for the initial amount of money invested to be repaid using the gains from the original investment

Question 2

average rate of return (ARR)

Answer 2

average annual profit of an investment project expressed as a percentage of the initial amount of money invested in the project

Question 3

capital outlay // principal

Answer 3

og amount invested

Question 4

BPB formula

Answer 4

cost of investment / contribution per unit

• can only be used if net cash glows ate the same for each time period

Question 5

average rate of return formula

Answer 5

(total returns - capital costs) / years of use
——————————————
capital costs

(x 100)

Question 6

what value of arr is good

Answer 6

a high one!