CAIE A-Level Business 10.3 Investment Appraisal Question Bank

CAIE A-Level Business 10.3 Investment Appraisal Question Bank
Cambridge International AS & A Level Business 9609 syllabus for exams in 2026, 2027 and 20282026–2028

Practise calculating payback, ARR and NPV and comparing their evidence and limitations with strategic, operational and stakeholder factors before recommending an investment.

Exam points

  • calculate payback, ARR or NPV from the supplied cash flows and retain timing and units
  • interpret each result against the firm's target, discount rate, liquidity and project risk
  • recommend an investment using quantitative results plus strategic fit and qualitative uncertainty

Covered syllabus points

10.3.1—Investment appraisal concept10.3.2—Payback and ARR10.3.3—NPV10.3.4—Investment appraisal decisions

Question 3

Question 3(a)

(a)

Using the data in Table 1.2, calculate the payback period of the country C location.

[ 2 ]

Question 3(b)

(b)

Using the data in Table 1.3, calculate the accounting rate of return (ARR) of the country D location.

[ 2 ]

Question 3(c)

(c)

Evaluate which location KTJ should choose for its new factory.

[ 12 ]

Question 3

Question 3(a)

(a)

Using the data in Table 1.1, calculate the payback period.

[ 2 ]

Question 3(b)

(b)

Using the data in Table 1.1, calculate the net present value (NPV) over six years discounted at 8%.

[ 2 ]

Question 3(c)

(c)

Evaluate LBM's decision to go ahead with the hot water mine.

[ 12 ]

Question 3

Question 3(a)

(a)

Using the data in Table 1.3, calculate the payback period for PPP's proposed new machine.

[ 2 ]

Question 3(b)

(b)

Using the data in Table 1.3, calculate the accounting rate of return (ARR) for PPP's proposed new machine.

[ 2 ]

Question 3(c)

(c)

Evaluate whether PPP should invest in the new machine.

[ 12 ]