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SingaporeBusiness ManagementQuick questions
Financial Management and Information
Quick questions on Investment appraisal explained: H2 Management of Business
5short 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 is payback period?Show answer
The payback period is the time taken for the project's net cash inflows to recover the initial outlay. Calculated by accumulating inflows until they equal the outlay (interpolating within the year).
What is average rate of return (ARR)?Show answer
The ARR expresses the average annual profit as a percentage of the initial outlay:
What is q1?Show answer
State one strength and one weakness of the payback method. [2 marks]
What is q2?Show answer
A project costs \150{,}000 and returns net inflows of \50{,}000, \60{,}000 and \70{,}000 over three years. Calculate the average rate of return. [3 marks]
What is q3?Show answer
Analyse why a firm should not base a major investment decision on the numerical appraisal alone. [6 marks]
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