UNIT5

Question 1

Investement appraisal

Answer 1

Evaluating the profitability or desirability of an investement project

Question 2

5 QUANTITATIVE METHODS OF INVESTMENT

Answer 2

Payback period

Average rate of return

Discounted payback period

Net present value

internal rate of return

Question 3

Annual forecasted net cash flow

Answer 3

Forecast cash inflows minus forecast cash outflows

Question 4

Factors affecting investement decision

Answer 4

Initital capital cost

residual value of investement

Life-expectancy of project
aims and objectives
external factors

Question 5

Payback period

Answer 5

Length of time it takes for the net cash inflows to payback the original capital cost of the investment

Question 6

Accounting rate of return (ARR)

Answer 6

Measures the profitability of an investment as a percentage of the inutual investment

Question 7

Net present value

Answer 7

Today’s value of the estimated cash flows resulting from an investment

Question 8

Internal rate of return (IRR)

Answer 8

The rate of discount that yield a net present value of zero-The higher the IRR, the more profitable the investment project is

Question 9

Criterion rate or levels

Answer 9

The minimum levels (max for payback period ) set by managers for investment appraisal results for a project to be accepted