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Investment appraisal
Students calculate and interpret payback, average rate of return and net present value.
2
Objectives
10
Flashcards
10
Questions
90 min
Study time
AqaA LevelBusinessAnalysing the strategic position of a business
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Syllabus checklist
What you need to know
2 objective pages available
Assessing investment options2 objectives
- Calculate and interpret payback, average rate of return and net present value.
- Evaluate investment decisions using investment criteria, non-financial factors, risk and uncertainty.
Key terms
quantitative analysisAssessing investment optionspaybacknet present valuequantitative analysis decisionfinancial decision-makingriskfinancial decision-making decisionfinancial decision-making stakeholder impact
Exam tips
- Assessing investment options exam tip 1: Write the method before the answer so the examiner can follow each step. Apply this to calculate and interpret payback, average rate of return and net present value..
- Assessing investment options exam tip 2: State the exact concept or formula you are using before substituting values. Apply this to calculate and interpret payback, average rate of return and net present value..
Common mistakes
- Assessing investment options common mistake 1: Show the method first, then give the final answer in the required form. Apply this directly to Assessing investment options.
- Assessing investment options common mistake 2: Name the relevant value or feature from the question and explain how it is used. Apply this directly to Assessing investment options.
Practice preview
- What is the primary purpose of investment appraisal in a business context?
- A company is considering investing in new technology. Which investment appraisal method would best help them understand how long it will take to recover their initial investment?
- If a business has a high level of competition in its industry, how might this influence its investment decisions?
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