Accounting 9706 · AS & A Level · Investment appraisal

Investment appraisal — practice question

Read Source A in the insert, which contains details about a planned project.
(a(i))[4]

Calculate the net cash flow for every year and the overall total for the project.

(a(ii))[3]

Calculate the accounting rate of return (ARR), giving your answer to two decimal places.

(b)[4]

Calculate the project's net present value (NPV).

(c)[7]

Calculate the change in NPV that would result if the extension were also built. Your response should show whether the change is an increase or a decrease.

(d)[7]

Advise Hiram on whether he should agree to build the sea wall and the extension. Justify your answer.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: Year 0 - initial cost $(400 000)$

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