Daniel Alexander Herrera 612625

Michelle Hollo Rosales 613395

What's Investment Appraisal and why is it important in Business?

A= Investment appraisal by its definition is a range of quantitative decision-making strategies

which try to assess the investment projects. Most businesses have some potential
investment opportunities which they most likely make happen. The investment appraisal
process is used by professionals to examine whether the investment option under
consideration is good for the firm or not.

Explain Investment opportunities using payback period and average rate of return (ARR) 2
examples using the following Scenario: Buying 2 Fixed Assets

A= Investment opportunities using payback period and average rate of return consists of the
payback period calculates the length of time that it takes for a capital investment to pay for
itself, using the annual net cash flows provided by that investment. While the average rate of
return it’s about; comparing the profitability of different choices over the expected life of an
investment. To do this, it compares the average annual profit of an investment with the initial
cost of the investment.

Examples:

Apple: “Apple's assembly processes for devices like the iPhone and iPad will be
accomplished by machines and robots, thanks to a $10.5 billion investment in manufacturing
planned by the company over the next year.” (N.hughes, 2013, 1)

“Apple disclosed to the U.S. Securities and Exchange Commission that it plans to spend
about $11 billion on capital expenditures in 2014. That's up considerably from 2013, when
Apple spent $7 billion — $6.5 billion of that on items such as product tooling and
manufacturing process equipment — according to its 10-K filing.” (N.hughes, 2013, 5)

Spotify: “Spotify today said it will spend up to $1 billion between now and April 21, 2026 to
repurchase its own shares. The dollar amount represents just under 2.5% of Spotify’s market
cap, with the company valued at $41.06 billion this morning as its shares rose 5.1% following
the repurchase news.” (A. Willhelm, 2021, 1)

“The goal of such efforts is to return cash to shareholders. Buybacks, along with dividends,
are among the key ways that companies can use their wealth to reward shareholders. Also,
by buying their own stock, companies can boost the value of their individual shares. By
limiting the shares in circulation, the company’s share count declines and the value of each
share consequently rises, in theory, as it represents a larger fraction of ownership in the
corporation.” (A. Willhelm, 2021, 3)

2 different APA Sources

TechCrunch is part of the Yahoo family of brands. (2021b, agosto 20). TechCrunch+.
https://techcrunch.com/2021/08/20/spotify-to-spend-1b-buying-its-own-stock/
Hughes, N. (2013, 13 noviembre). Apple investing record $10.5 billion in supply chain robots
& machinery. AppleInsider.
https://appleinsider.com/articles/13/11/13/apple-investing-record-105-billion-on-supply-chain-
robots-machinery

App. (s. f.). Kognity.

https://app.kognity.com/?next=/study/app/m23-pd-business-management-hl-10682/sid-73-ci
d-128348/book/payback-period-id-8450/