CAPITAL INVESTMENT DECISIONS

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Total annual profit =
Net profit per unit x replacement number
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Total investment cost =
Total cost of unit x replacement number
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Total disposal value =
Sale value per unit x replacement number
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Average annual profit =
Total anual profit x life time until replacement (yrs) / life time until replacement (yrs)
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Average annual investment =
Investment cost + total disposal value / 2
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Accounting Rate of Return (ARR) =
Total annual profit / Average annual investment x 100
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Payback period (PP) graph - Headings along horizontal axis
Year; Cash flow; Cumulative cash flow
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Payback period (PP) graph - Headings down the vertical axis
Years: 0, 1, 2, 3, 4,
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Year 0 =
(Total investment); (Total investment)
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Cash flow (numbers vertically down)
Year 0 = total investment; then every year following = Total annual profit
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Cumulative Cash Flow (numbers vertically down)
Year 0 = Year 0 = total investment; then every year following = investment - annual profit
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Present Value (PV) =
Discount Factor (DF) x Cash Flow
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Internal rate of return (IRR)
The discount rate, which, when applied to the future project cash flows, produces a zero NPV
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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
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Other cards in this set

Card 2

Front

Total investment cost =

Back

Total cost of unit x replacement number

Card 3

Front

Total disposal value =

Back

Preview of the front of card 3

Card 4

Front

Average annual profit =

Back

Preview of the front of card 4

Card 5

Front

Average annual investment =

Back

Preview of the front of card 5
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