Investment Appraisal

Question 1

Investment appraisal involves:

Answer 1

Comparing the expected future cash flows of an investment with the initial expenditure on that investment

Question 2

2 advantages of Payback Period

Answer 2

• Simple method to calculate and understand
• Particularly useful for businesses where the cash flow management is vital

Question 3

2 disadvantages of Payback Period

Answer 3

• Does not provide insight into the profitability of investments
• Both the timing and the future discounted values of cash inflows is unconsidered