Capital investmen appraisal

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Investment appraisal:

  • Measure profitability of investing in new machinary for example.

ARR

PayBack

NPV

IRR

ARR (accounting rate of return) measure profitability of investment by working out the average profit and average investment divided by each other and x 100. It roduces a percentage: the higher the perentage.. the more you should accept..means more profitable!

Advan: quick method/focuses on the profit/easy to assess

Diadvan: does not take into account time/ best to consider with payback figure

Payback How long it takes to make back the money spent on new investment (machinary) in years and months. It is often used by smaller companies rather than larger companies as it s a quic and easy method of finding out how long it…

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