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Chapter 2

Basic investment appraisal techniques

Outcome

By the end of this session you should be able to:

 define a relevant cash flow (and distinguish it from an accounting profit)

 identify and calculate relevant cash flows in a scenario

 calculate the payback period and use it to appraise an investment

 discuss the usefulness of payback as an investment appraisal method

 calculate return on capital employed (ROCE) (accounting rate of return) and
use it to appraise an investment

 discuss the usefulness of ROCE as an investment appraisal method

and answer questions relating to these areas.

The underpinning detail for this Chapter in your Integrated Workbook can
be found in Chapter 2 of your Study Text

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