Unit 7.8 - Analysing strategic options: Investment appraisal Flashcards
1
Q
What are the reasons for a businesses carrying out investment appraisal?
A
- When contemplating introducing new products
- Expansion
- Investing in new technology
- Investing in infrastructure
- In other decisions - promotional campaigns, training etc
2
Q
What are the 3 ways of assessing investment appraisal?
A
- Payback
- Average rate of return (ARR)
- Net present value (NPV)
3
Q
What is the equation for average annual profit?
A
total net profit before tax over asset’s lifetime/ useful life of asset in years
4
Q
What is the equation for ARR?
A
average annual profit/asset’s initial cost x 100
