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INVESTMENT APPRAISAL - Coggle Diagram
INVESTMENT APPRAISAL
DEFINITION
The quantitative techniques used to calculate the financial costs and benefits of an investment decision.
PAYBACK PERIOD
The amount of time needed for an investment project to earn enough profit to repay the initial cost of the investment.
Formula 
Disadvantages
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this concentration on the short term may lead businesses to reject very profitable investments just because they take some time to repay the capital
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Advantages
allows firms to see whether it will break-even on the purchase of an asset before it needs to be replaced.
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AVERAGE RATE OF RETURN
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FORMULA
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Disadvantages
as all the cash inflows are included, the later cash flows, which are less likely to be accurate, are incorporated into the calculation
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