3.3 Decision Making Techniques

Question 1

Three Kinds of Investment Appraisal

Answer 1

Payback
Average Rate of Return
Net Present Value

Question 2

Payback =

Answer 2

1) add NCF until you have enough to cover initial costs
2) (amount still needed / NCF for year) x12

Question 3

Average Rate of Return =

Answer 3

1) add NCF - initial investment
2) figure/ number of years
3) (figure/ initial investment) x100

Question 4

Net Present Value =

Answer 4

1) multiply NCF by discount rate
2) Add new NCF - initial investment

Question 5

Moving Averages

Answer 5

Identify trend in data in sales and can predict what might happen in the future

Question 6

Moving Averages =

Answer 6

1) take first 3 months data and calculate average
2) ingnore first year and do next 3
3) repear
4) add to table next to middle number
5) plot on graph and see correlation

Question 7

Decision Trees

Answer 7

Show how much profit you are likely to make from different projects

Question 8

Critical Path Analysis

Answer 8

Shows planned path of a project and how long it will take

Question 9

Float Time =

Answer 9

lates finish time - duration - earliest start time