3.8 Investment Appraisal

Question 1

Payback Period

Answer 1

Calculates the length of time it takes for a capital investment to pay itself, using the annual net cash flows provided by that investment

Question 2

Average Rate of Return

Answer 2

Measures the profitability of an investment over time by measuring the return on an investment as a % of the original cost

Question 3

Net Present Value

Answer 3

Calculates real value instead of absolute value of an investment project by adjusting the actual value of money in the future