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
2
Q
What is average rate of return
A
The percentage of profit that is being generated from the investment
3
Q
What is net present value
A
The profit of an investment taking into account the time value of money.
4
Q
Equation for payback period ?
A
Number of years + ( amount needed / profit from the year ) x 12
5
Q
Equation for ARR
A
Average profit. / initial investment x 100.
