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Business_A-level_Cie

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  1. business-and-its-environment

    enterprise
    6 主题
  2. business-structure
    6 主题
  3. size-of-business
    3 主题
  4. business-objectives
    3 主题
  5. stakeholders-in-a-business
    2 主题
  6. external-influences-on-business
    12 主题
  7. business-strategy
    10 主题
  8. human-resource-management
    human-resource-management-hrm
    8 主题
  9. motivation
    4 主题
  10. management
    2 主题
  11. organisational-structure
    5 主题
  12. business-communication
    5 主题
  13. leadership
    2 主题
  14. human-resource-strategy
    3 主题
  15. marketing
    the-nature-of-marketing
    7 主题
  16. market-research
    3 主题
  17. the-marketing-mix
    6 主题
  18. marketing-analysis
    5 主题
  19. marketing-strategy
    3 主题
  20. operations-management
    the-nature-of-operations
    3 主题
  21. inventory-management
    2 主题
  22. capacity-utilisation-and-outsourcing
    1 主题
  23. location-and-scale
    2 主题
  24. quality-management
    1 主题
  25. operations-strategy
    4 主题
  26. finance-and-accounting
    business-finance
    2 主题
  27. sources-of-finance
    3 主题
  28. forecasting-and-managing-cash-flows
    1 主题
  29. costs
    4 主题
  30. budgets
    1 主题
  31. financial-statements
    4 主题
  32. analysing-published-accounts
    6 主题
  33. investment-appraisal
    2 主题
课 Progress
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The need for investment appraisal

  • Investment appraisal involves comparing the expected future cash flows of an investment with the initial expenditure on that investment 

  • A business may want to analyse 

    • How soon the investment will recoup the initial outlay

    • How profitable the investment will be 

  • Before an investment can be appraised key data will need to be collected, including

    • Sales forecasts

    • Fixed and variable costs data

    • Pricing information

    • Borrowing costs

  • The collection and analysis of this data is likely to take some time

    • It requires significant experience to interpret the data appropriately before the investment appraisal can take place

Payback period

  • The payback period is a calculation of the amount of time it is expected an investment will take to pay for itself 

  • The payback period is calculated using the formula

    Payback space period space equals space fraction numerator Initial space outlay over denominator Net space cash space flow space per space period end fraction space space space equals space space space Years divided by months

Worked Example

Gomez Carpets is considering an investment in a new storage facility at a cost of $200,000. It expects additional net cash flow of $30,000 per year as a result of the investment.

Calculate the payback period for the investment.

(3)

Step 1: Substitute the values into the formula

equals space fraction numerator $ 200 comma 000 over denominator $ 30 comma 000 end fraction space space equals space space space 6.67 space years space space (1)

Step 2: Convert the outcome to years and months

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