3.13 Capital investment appraisal


Additional information

The calculation and use of cash flows in capital investment appraisal.


Payback and net present value (discounted cash flow) of a capital project.

Payback and net present value of a capital project will include understanding relevant terminology: payback period, net present value, discount factor, cost of capital.

  • payback period
  • net present value.

The benefits and limitations of the payback and net present value methods of capital investment appraisal.


The use of capital appraisal measures in the evaluation of projects.

The evaluation of projects could include:

  • financial factors
  • non-financial factors.