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6. Payback period (PP) graph - Headings along horizontal axis

  • Year; Cash flow; Cumulative cash flow
  • Years: 0, 1, 2, 3, 4,

7. Investment in new machinery - cash flow graph (Should investment be taken)

  • Years (Horizontal); Vertical - Capital expenditure; Savings; Disposal; Net cash flow; Discount factor; Present value = Net presnt value
  • Years (Vertical); Horizontal - Capital expenditure; Savings; Disposal; Net cash flow; Discount factor; Present value = Net presnt value

8. Internal rate of return (IRR)

  • The discount rate, which, when applied to the future project cash flows, produces a zero NPV
  • If project NPV is positive, it should be accepted; if it is negative it should be rejected
  • If competing projects have positive NPVs, the one with the highest NPV is selected

9. Payback period (PP) graph - Headings down the vertical axis

  • Years: 0, 1, 2, 3, 4,
  • Year; Cash flow; Cumulative cash flow

10. Total investment cost =

  • Net profit per unit x replacement number
  • Investment cost + total disposal value / 2
  • Total cost of unit x replacement number
  • Total annual profit / Average annual investment x 100

11. Present Value (PV) =

  • Cash Flow x Discount Factor (DF)
  • Discount Factor (DF) x Cash Flow
  • Discount Factor (DF) - Cash Flow
  • Discount Factor (DF) / Cash Flow

12. Total disposal value =

  • Net profit per unit x replacement number
  • Investment cost + total disposal value / 2
  • Sale value per unit x replacement number
  • Total annual profit / Average annual investment x 100

13. Average annual investment =

  • Total cost of unit x replacement number
  • Investment cost + total disposal value / 2
  • Net profit per unit x replacement number
  • Total annual profit / Average annual investment x 100

14. Average annual profit =

  • Total cost of unit x replacement number
  • Total anual profit x life time until replacement (yrs) / life time until replacement (yrs)
  • Total annual profit / Average annual investment x 100
  • Net profit per unit x replacement number
  • Investment cost + total disposal value / 2