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Investment Appraisal
Quick questions on Investment appraisal evaluation explained: H2 Principles of Accounting
4short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What are comparing the four methods?Show answer
NPV is generally regarded as the best because it uses all cash flows and accounts for timing, but the methods are complementary: payback flags liquidity and risk, the ARR offers a familiar profit yardstick, and the IRR expresses the result as a financing ceiling.
What is q1?Show answer
State which appraisal method is generally regarded as the most reliable and why. [2 marks]
What is q2?Show answer
Give two non-financial factors a firm should consider before investing. [2 marks]
What is q3?Show answer
Explain why a marginal positive NPV should be treated with caution. [3 marks]
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