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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Doubt

  • This topic has 3 replies, 2 voices, and was last updated 1 week ago by LMR1006.
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  • September 19, 2023 at 9:35 am #692252
    krrish2005
    Participant
    • Topics: 71
    • Replies: 143
    • ☆☆☆

    Sir of all the investment appraisal technique in fm only npv takes into account the relative size of investment….right?

    September 19, 2023 at 12:29 pm #692261
    LMR1006
    Keymaster
    • Topics: 0
    • Replies: 294
    • ☆☆☆

    NPV is the only investment appraisal technique in financial management that takes into account the relative size of investment. The Net Present Value (NPV) method considers the cash flows generated by the investment project and discounts them to their present value using a predetermined discount rate. This allows for the comparison of projects of different sizes by considering the timing and magnitude of cash flows.

    Other techniques such as Internal Rate of Return (IRR) and Payback Period do not explicitly consider the relative size of the investment.

    September 19, 2023 at 12:38 pm #692262
    krrish2005
    Participant
    • Topics: 71
    • Replies: 143
    • ☆☆☆

    And only npv is absolute measure of return and others are relative measure of return ….right?

    September 19, 2023 at 5:43 pm #692276
    LMR1006
    Keymaster
    • Topics: 0
    • Replies: 294
    • ☆☆☆

    NPV (Net Present Value) is considered an absolute measure of return, while other measures such as IRR (Internal Rate of Return), payback period, and ROCE (Return on Capital Employed) are considered relative measures of return.

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