AccountingCode 9706
Investment appraisal
What this topic asks you to be able to do
- the net cash inflows and outflows the project is expected to generate in the years ahead
- how to use each of these techniques of capital investment appraisal: payback; the accounting rate of return (ARR), where ARR = (average profit / average investment) × 100; the net present value (NPV) method; the internal rate of return (IRR) method
- what each of these capital investment appraisal techniques does well and where it falls short
- how to arrive at investment choices and advice drawing on supporting data
- how much non-financial factors matter