Investment appraisal

The quantitative techniques used to calculate the financial costs and benefits in investments?

• Investment Appraisal

• Cash Flow Forecast

• Profit

• Investment

The Payback Period (PBP) will always select the investment that

• Gives the highest rate of return
• Returns the cost of investment first
• Has the highest total net cash flow

The main advantage of ARR

• easy comparisons
  
• money
• profit
• ignores timing of cash inflow

To calculate the remaining months, which calculation for Payback is correct?

• Payback in months = (Income required to reach payback / Income generated in the payback year) ×12

• Payback in years = (Income required to reach profit / Income generated in the payback month) ×12

• Payback in months = (Costs in payback year / Income generated in the payback year) ×12

• Payback in years = (Costs in payback month / Costs generated in the payback year) ×12

The greater net cash flows, the faster the payback period

• TRUE
• FALSE

The following are all methods of investment appraisal, EXCEPT

• Payback period

• Net present value using discounted cash flows

• Average rate of return

• Balance sheet return

The Payback method of Investment Appraisal focuses on which option reimburses its own costs the quickest.
True or false?

• True
• False

In calculating the Payback Period we always round down to the nearest day.
True or false?

• True
• False

The initial investment is 5,000. In the first year the firm paid back 1,000 in the second year 2,000 and the third year 3,000. Calculate the payback period

• 2 years

• 3 years

• 3 years 4 months

• 2 years 8 months

Porter’s five forces are:

• The extent of industry rivalry, Bargaining power of buyers, Bargaining power of suppliers, Threat of substitutes, Threat of new entry

• The extent of industries, Bargaining power of buyers, Bargaining power of suppliers, Threat of suspension, Threat of new entry

• The extent of industry rivalry, Bargaining power of buyers, Bargaining power of suppliers, Threat of substitutes, Threat of new bargins