3.7.8
- Created by: Jessiiccaa
- Created on: 07-12-21 21:46
View mindmap
- 3.7.8 Investment Apprasial
- Financial methods
- Avergae rate of return
- Formula: ARR = average annual profit x 100% divided by assest's initial cost
- The percentage allows comparison with other investment opportunities
- Calculates the annual percentage rate of return on each possible investment
- Net present value
- Disocunted cash flow
- Time-value principle
- Risk
- Opportuinty cost
- To show the effect of the time principle we need to calculate the present value of cash inflows and outflows through the use of discounting
- Discounting is the process of adjusting the value of money received at some future date to its present value
- Time-value principle
- To calculate we need to know:
- Inital cost
- Expected inflows and outflows
- Rate of discount
- Duration of investment
- Remaining value of profect after investment
- Present value is the value of a future stream of income from an investment, converted into its current worth.
- Disocunted cash flow
- Payback
- Payback measures the time period required for the earnings from an investment to recoup its original cost
- Avergae rate of return
- Businesses take decsions regarding investment when...
- Contemplatig introducing new products
- Investing in technology
- Expansion
- Investing in infrastructure
- Method chosen depends on...
- Type of firm
- Market
- Corportae objectives
- Financial methods
Similar Business Studies resources:
Teacher recommended
Teacher recommended
Comments
No comments have yet been made