3.8 Investment appraisal
3.8 Investment appraisal (some HL only)
“You may prove anything by figures” - Thomas Carlyle, Scottish writer (1795 - 1881)
Many students try to include aspects of investment appraisal in their Internal Assessment (mainly the HL IA, but not uncommon for the SL IA). As with all business management tools, theories and techniques, investment appraisal (if used) must be relevant to the research question and add value to the IA.
In addition, the investment appraisal techniques in the syllabus (the payback period, average rate of return, and net present value) are best applied to the purchasing decision of a fixed asset, rather than for a complete projects which could include both fixed and non-fixed assets. In other words, investment appraisal in the IA works better for decisions about capital expenditure rather than revenue expenditure.
Above all, if you use quantitative analysis in your IA, make sure the information is meaningful and adds value to the research question.
InThinking Business Management resources
Click the hyperlinks below to access the InThinking resources for this particular section of the IB Business Management syllabus.
- Payback period (PBP) & Average rate of return (ARR) (AO3, AO4)
- Net present value (NPV) (HL) (AO3, AO4)
- Unit 3.8 Investment appraisal (some HL only) - Question bank (over 30 questions for students to try in the question bank)
- Glossary of key terms
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