Unit 3 - Chapter 20: Investment Appraisal
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8 Terms
Payback Period
length of time it takes for the net cash inflows to pay back the original capital cost of the investment
Net present value (NPV)
today’s value of the estimated net cash flows resulting from an investment
Investment appraisal
evaluating the profitability or desirability of an investment project
Annual forecast net cash flows
forecast cash inflows minus forecast cash outflows
Accounting rate of return (ARR)
measures the annual profitability of an investment as a percentage of the capital cost
Criterion rate
the minimum accounting rate of return that a business would accept before approving an investment
Qualitative factors
factors that cannot be measured in numerical or financial terms that are considered by managers before taking decisions