209-Investment appraisal

Question 1

What is meant by investment appraisal?

Answer 1

A technique used to evaluate planned investment by a business and measure its planned financial value to the business

Question 2

Payback formula

Answer 2

Number of full years then
Amount needed final year/amount getting in final year x12

Question 3

How to calculate ARR?

Answer 3

1)Calculate the total profit. Total returns - initial cost
2)Divide this answer by the number of years
3)Divide this by the initial cost and times by 100

Question 4

How to calculate NPV

Answer 4

Income x discount factor
Add each year together
Deduct cost of investment
(Any positive figure is good)