Investment Apprasial

helps simplify choices/make decisions
Simple Payback
1. time in which initial investment is expected to be recovered
2. investment £100,000, expected to generate £25,00 a year, payback £100k/£25k = 4 years
3. L3: helps companies establish when money can be paid back by
4. L4: however doesn't consider change in £ over years
Average Rate of Return
1. looks at predicted average yearly return on investment
2. average yearly profit / initial investment x100
  1. Average yearly profit: total profit/no. years
3. L3: looks at whole long term profitability
4. L4: takes no account of time value of money
Net Present Value
1. takes into account when cash inflows are recieved
2. net cash flow x discount factor (do this for every year)
  1. add all together then minus initial investment
3. L3: focuses on importance of cash inflows early in project
4. L4: difficult in changing Uk economy, to predict rates

Resource summary

	Created by beccehjane over 11 years ago