Revision Notes

Payback Method

• exact times can be calculated
• might not get return column
• allows companies to forecast
• good for small businesses
• priorotises quick investment
• does not take into account net return on following years.

ARR

• calculates percentage return annually 
• factors in all net returns
• high ARR is desired
• shows reliability of investment
• doesn't prioritise time
• inflation must be considered

NPV

• takes into account what ARR doesn't
• works towards targets
• discount factors allows realisticity
• rejects investments
• takes into account full product life…