MINDMAP
- Created by: stellito005
- Created on: 13-03-19 17:49
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- Definition- a process used to determine whether funds given to a business for investment are likely to generate profit
- Investment Appraisal
- Purpose of constucting
- To evaluate the attractiveness of a possible investment.
- To lower the risk of investing
- Help make decisions
- To lower the risk of investing
- To evaluate the attractiveness of a possible investment.
- Payback period-the amount of time it takes to recover the initial investment
- Positives
- quick, straight forward
- can pay back before new models come on the market-technology.
- quick, straight forward
- Negatives
- does not take into account of money+time value of money
- doesn't take cash inflows into account after the payback
- does not measure profitability
- doesn't take cash inflows into account after the payback
- does not take into account of money+time value of money
- Positives
- NPV-assumes that money received invested in the present is worth more than money invested in the future
- Positives
- takes into account the price changes that value of money
- Negatives
- complex to calculate
- prone to errors
- cashflow-estimate
- prone to errors
- complex to calculate
- Positives
- ARR-the average annual profit expressed as a % of the initial investment
- Net profit per annum/initial cost X 100
- Purpose of constucting
- Investment Appraisal
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