3.8 Investment appraisal (some HL only) Flashcards

1
Q

Investment

A

Business expenditure on fixed assets with the potential to generate future financial benefits

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2
Q

Investment appraisal

A

A quantitative decision-making tool used to assess and justify the capital expenditure of a firm in terms of whether it will be financially worthwhile.

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3
Q

Payback period formula

A

Cost of the investment / Annual net eash flow

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4
Q

Average rate of return (ARR) formula

A

Average annual profit/ Initial investment

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5
Q

Net present value (NPV)

A

Calculate the real value of an investment project by discounting technique that calculates the real value of an investment project by discounting the value of future cash flows.

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