Project Appraisal Techniques Flashcards
1
Q
What are the basic decision-making factors to consider when making a choice between two or more projects using payback period?
A
A project is acceptable if it pays back within the target period when choosing between two or more projects, the project(s) with the fastest payback is chosen.
2
Q
How do depreciation and sunk costs affect the decision-making process in project appraisal?
A
Sunk costs and depreciation are non-relevant factors for project appraisal. Sunk costs are past expenditure that cannot be recovered and hence cannot influence the current decision. Depreciation is a non-cash item and does not affect future cash flows.
