Assessing Investments (AQA A-Level Business): Quizzes
📚Quizzes
Practise the questions
10 questions from this quiz
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Practise the questions
10 questions from this quiz
What is the primary aim of investment appraisal?
What is the primary aim of investment appraisal?
Identify best, fastest, least risky returns
What is the formula for calculating Average Rate of Return (ARR)?
What is the formula for calculating Average Rate of Return (ARR)?
(Average Net Return / Investment) × 100
Why is money available today worth more than the same amount in the future?
Why is money available today worth more than the same amount in the future?
Risk, inflation, and opportunity cost
Why do businesses prefer investments with short payback periods?
Why do businesses prefer investments with short payback periods?
Faster capital recovery & reduced risk
What is the main disadvantage of ARR?
What is the main disadvantage of ARR?
Ignores the time value of money
What does a positive NPV indicate?
What does a positive NPV indicate?
Project will generate value for business
What key information does payback period ignore?
What key information does payback period ignore?
Cash flows after payback is reached
How do high interest rates affect discounting?
How do high interest rates affect discounting?
Future payments must be heavily discounted
Why is NPV considered the most accurate appraisal method?
Why is NPV considered the most accurate appraisal method?
Accounts for time value of money
What limitation do ARR and payback period share?
What limitation do ARR and payback period share?
Both fail to account for time value