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1. Which of the following is NOT an investment appraisal method? (i) Net present value (NPV) (ii) Payback period (PP) (iii) Accounting time of return (ATR) (iv) All of the above

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1. Which of the following is NOT an investment appraisal method?
(i) Net present value (NPV)
(ii) Payback period (PP)
(iii) Accounting time of return (ATR)
(iv) All of the above

1. Which of the following is NOT an investment appraisal method? (i) Net present value (NPV) (ii) Payback period (PP) (iii) Accounting time of return (ATR) (iv) All of the above

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AdeleMaster · Tutor for 5 years

Answer

<p> (iv) All of the above</p>

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<p> Each of the options provided in the question is investigating a different concept/method within finance. Specifically, all these options are methods of investment appraisal that businesses use to judge the feasibility and profitability of investing in a specific project. A brief overview of them is:<br /><br />(i) Net Present Value (NPV) is a method used to evaluate investments or projects that generate cash flows over a period of time. The basic idea is to determine the value of a dollar today compared to the value of that dollar in the future, taking inflation and returns into account.<br /><br />(ii) Payback Period (PP) is a simple appraisal method used to evaluate the initial investment cost, i.e., it signifies the time period it takes for the initial investment in a project to be covered by the cash inflows generated by the project.<br /><br />(iii) Accounting Time of Return (ATR) also known as Average Rate of Return (ARR), provides a measure of the average net income that the investment generates as a percentage of the original investment.<br /><br />These are common used methods for evaluating whether an investment or project will create value or generate satisfactory returns. If one should be incorrect it's option "(iv) All of the above", as this wording suggests that none of the methods is an investment appraisal method, which is contrary to what we just explained for options i-iii.<br /></p>
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