Module 5 - Capital Investment Appraisal Flashcards

1
Q

Equation for internal rate of return

A

IRR = A+((B-A) x (Na / Na - Nb))

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2
Q

Accounting rate of return

A

ARR = (Average annual profits / Average Capital Investment) x 100

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3
Q

Average annual profits

A

AAP = ((annual cash flow generated from the investment - depreciation) / number of years investment)

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4
Q

Average capital investment

A

1/2 (investment + residual value)

Or (investment + residual value) / 2

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