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Investment appraisal (Investment appraisal in practice (Businesses tend to…
Investment appraisal
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Payback period
is the length of time it takes for an initial investment to be repaid out of the net cash inflows from a project
PP decision rule
for a project to be acceptable,
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I two (or more)competing projects have paybak periods shorter than the maximum payback period,
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Net present value
present value of cash inflows are compared to the PV of cash outflows,
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NPV decision rule
If the NPV of a project is positive,
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If two(or more)competing projects have positive NPVs,
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IRR decision rule
For a project to be acceptable,
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If two(or more)competing projects exceed the minimum IRR,
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