Investment appraisal

Worked examples (10)

• 1Apply the decision rules (4 marks)
• 2Rank two projects (4 marks)
• 3Resolve a conflict (5 marks)
• 4Use the figures (4 marks)
• 5Limitations of the appraisal (4 marks)
• 6A marginal NPV (4 marks)
• 7Structure the recommendation (4 marks)
• 8Why NPV is the deciding method (4 marks)
• 9Choose between two projects (5 marks)
• 10Why a recommendation matters (3 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Add back depreciation (4 marks)
• 2Year 0 outflow (3 marks)
• 3Final-year inflow (4 marks)
• 4Relevant or not? (4 marks)
• 5Build the cash-flow profile (6 marks)
• 6Ignore sunk costs (4 marks)
• 7Working capital in and out (4 marks)
• 8Why cash, not profit (4 marks)
• 9Don't double-count depreciation (3 marks)
• 10Only incremental fixed costs (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Payback period (4 marks)
• 2Payback with interpolation (5 marks)
• 3Accounting rate of return (5 marks)
• 4Net present value (6 marks)
• 5NPV decision (3 marks)
• 6Internal rate of return (6 marks)
• 7IRR decision (3 marks)
• 8Strength/weakness of payback (4 marks)
• 9Why NPV is preferred (4 marks)
• 10Time value of money (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style

Worked examples (10)

• 1Why non-financial factors matter (4 marks)
• 2Identify the factors (4 marks)
• 3Effect on employees (4 marks)
• 4Environmental factors (4 marks)
• 5Override a profitable project (5 marks)
• 6Accept a financially weak project (4 marks)
• 7Apply, don't list (4 marks)
• 8Weigh both sides (5 marks)
• 9Effect on customers (4 marks)
• 10Strategic fit (4 marks)

Model answers (10)

• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style
• ✓Model answer — 9706 Paper 4 style