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Investment Appraisal, definition - Coggle Diagram

- - - - Simple and quick
      - Firms can identify how long they can recoup and whether or not it will break-even on a purchased asset
      - Compare different investment projects
      - Assess projects that yields quick returns
      - Short term, so calculations are less prone to forecasting errors
    - - Encourages short-term approach to investment
      - Contribution per month is likely to be constant
      - Focuses on time as the key criterion rather than profit
      - Lacks qualitative assessment
  - - - Enables easy comparisons of the returns of different projects
    - - Ignores timing of cash inflows (e.g. seasonal factors)
      - Project’s lifespan is needed, which might just be a random guess
      - Errors are likelier the longer the forecasting period