3.3.2 Investment apprasial

Question 1

criterion level

Answer 1

a yardstick set by directors to enable managers to judge whether investment ideas are worth pursuing

Question 2

Cumulative cash

Answer 2

the build-up of cash over several time periods

Question 3

discounting

Answer 3

applying a discount factor to a money sum to take into account the opportunity cost of money over time

Question 4

Present values

Answer 4

the discounting of future cash flows to make them comparable with today’s cash. This takes into account the opportunity cost of waiting for the cash to arrive

Question 5

short-termism

Answer 5

making decisions on the basis of the immediate future and therefore ignoring the long-term future of the business

Question 6

tactical decisions

Answer 6

those that are day-to-day events and therefore do not require a lengthy decision making process