Accounting 9706 · AS & A Level · Investment appraisal

Investment appraisal — practice question

Consult Source B in the insert.
(a)[4]

Explain how the internal rate of return (IRR) can help when making a capital investment decision.

(b(i))[6]

Calculate the net present value (NPV) for Machine A.

(b(ii))[4]

Calculate the internal rate of return (IRR) for Machine A.

(b(iii))[4]

Calculate the accounting rate of return (ARR) for Machine A.

(c)[7]

Advise the directors on which machine to buy. Support your answer.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: IRR takes account of the time value of money

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