3.8 Investment appraisal

Objective notes

2 learning objectives

3.8.1Investment appraisal methods

• Evaluate investment opportunities using payback period and average rate of return (ARR)

• Investment appraisal supports decisions about project risk, return, liquidity, and strategic fit

3.8.2(HL)—Net present value

• Evaluate investment opportunities using net present value (NPV)

• NPV accounts for time value of money and discounted future cash flows