Abstract
After studying this chapter, you should be able to:
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explain the opportunity cost of an investment;
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distinguish between compounding and discounting;
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explain the concept of net present value (NPV) and internal rate of return (IRR);
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calculate NPV, IRR, payback period and accounting rate of return;
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explain the limitations of payback and the accounting rate of return methods.
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References and Further Reading
Coulthurst, N.J. (1985a) Capital investment appraisal techniques — DCF v. traditional methods. The Accountant’s Magazine ( Scotland ), February, 84–8.
Coulthurst, N.J. (1985b) Capital investment appraisal techniques — IRR v. NPV, The Accountant’s Magazine, May, 230–4.
Drury, C. (1992) Management and Cost Accounting, 3rd edn, Chapman and Hall, Ch. 15.
Drury, C., Braund, S., Osborne, P. and Tayles, M. (1993) A Survey of Management Accounting Practices in UK Manufacturing Companies, ACCA Research Occasional Paper, Chartered Association of Certified Accountants.
Layard, R. (1972) Cost Benefit Analysis. Penguin.
McIntyre, A.D. and Coulthurst, N.J. (1986) Capital Budgeting Practices in Medium-Sized Businesses — A Survey, Chartered Institute of Management Accountants. See also Planning and control of capital investment in medium-sized UK companies, Management Accounting, March 1987, 39–40.
Misham, E.J. (1982) Cost Benefit Analysis: An Informal Introduction Allen and Unwin.
Pike, R.H. and Wolfe, M.B. (1988) Capital Budgeting in the 1990s, Chartered Institute of Management Accountants. See also The capital budgeting revolution, Management Accounting, October 1988, 28–36.
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© 1994 Colin Drury
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Drury, C. (1994). Capital investment decisions. In: Costing. Springer, Boston, MA. https://doi.org/10.1007/978-1-4899-6880-7_12
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DOI: https://doi.org/10.1007/978-1-4899-6880-7_12
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