Accounting Business Reporting for Decision Making

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

12.1 explain the nature and scope of investment decisions

12.2 describe and apply the concept of the accounting rate of return (ARR)

12.3 explain and use the payback period (PP) method

12.4 discuss and calculate net present values (NPV) and apply the decision rule

12.5 discuss and calculate internal rates of return (IRR) and apply the decision rule

12.6 explain some of the practical issues in making investment decisions.

CHAPTER 12

Capital investment

Contents

Chapter 12 preview

12.1 The nature and scope of investment decisions

12.2 Accounting rate of return

12.3 Payback period

12.4 Net present value

12.5 Internal rate of return

12.6 Practical issues in making decisions