investment apprasial 2

Question 1

payback pros and cons

Answer 1

quick simple and easy to calculate
payback doesnt take into account what happends after the payback

Question 2

ARR pros and cons

Answer 2

easier comparison with other investments as it shows level of profits

fails to differenciate between investments that generate high returns in eary years to those that return highger in later years - cash flow problems

Question 3

NPV pros and cons

Answer 3

takes into account inflation and how much your money will actually be worth

tries to predict inflation which could be wrong