Investment appraisal

Front

It means purchasing capital goods, such as equipment, vehicles and new buildings, and improving existing fixed assets with the goal of generating income or appreciation.

Back

Investment

Front

It refers to the quantitative techniques used in evaluating the viability, feasibility or attractiveness of an investment proposal.

Back

Investment appraisal

Front

Quantitative investment appraisal does not require the following information: The initial capital cost of the investment, The estimated life expectancy, The residual value of the investment, The forecasted net returns, Depreciation.

Back

Depreciation

Front

It estimates the length of time required for an investment project to pay back its initial cost outlay.

Back

Payback period

Front

It is not at advantage of payback period.

Back

It does not help firms with cash-flow problems

Front

It is not at disadvantage of payback period.

Back

It is a short-term measure of quick returns on investment.

Front

It measures the annual net return on an investment as a percentage of its capital cost.

Back

Average rate of return

Front

It is not an advantage of the average rate of return.

Back

It does not consider the timing of cash inflows. Two projects might have the same ARR but one could pay back more quickly despite this.

Front

It is not a disadvantage of the average rate of return.

Back

It allows for easy comparisons with other competing projects, for better allocation of investment funds

Front

We assume for the IB examinations, that the cash inflows are the same as the annual revenues earned from the project and the cash outflows are the annual operating costs.

Back

True