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2 marksInvestment Appraisal

CAPE Management of Business Unit 1 · 2015 · Paper 2 · Question 6(a)

Bob's Co Ltd is evaluating an investment project with an initial cost of $200 000, projected cash flows over 4 years, and a 10% discount rate.

Define the term 'investment'.

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Other parts of this question

  1. 6(b)(i)State TWO advantages and TWO disadvantages of the payback period method of investment appraisal.[4 marks]
  2. 6(b)(ii)State TWO advantages and TWO disadvantages of the net present value (NPV) method of investment appraisal.[4 marks]
  3. 6(b)(iii)State TWO advantages and TWO disadvantages of the average rate of return method of investment appraisal.[4 marks]
  4. 6(c)(i)Compute the net present value for the project.[6 marks]
  5. 6(c)(ii)State whether or not Bob's Co Ltd should invest in the project, outlining TWO reasons for your answer.[5 marks]

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