Investment Appraisal Flashcards

1
Q

What is the payback period

A

The amount of time the cash flows take to pay off the initial investment

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2
Q

What is average rate of return

A

The percentage of profit that is being generated from the investment

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3
Q

What is net present value

A

The profit of an investment taking into account the time value of money.

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4
Q

Equation for payback period ?

A

Number of years + ( amount needed / profit from the year ) x 12

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5
Q

Equation for ARR

A

Average profit. / initial investment x 100.

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