3.8 Investment Appraisal
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4 Terms
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Payback Period (Definition)
A calculation of the length of time that it takes for a capital investment to pay for itself, by estimating future cash flow each year and working out the month and year in which the cash flow will finally cover the investment cost.
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Payback Period (Calculation)
amount left to pay/net cash flow in that year x 12
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Average Rate of Return (Definition)
An investment appraisal technique that expresses the annual forecast returns as a percentage of the initial capital cost.
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Investment Appraisal
A process of quantitative and qualitative evaluation of an investment decision, by analysing costs, benefits, risks and expected returns
Note 
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