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Chapter 4: The Decision-making Process...
Learning objectives
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The main outcome expected from this chapter is that the reader is aware of both traditional and discounted cash flow investment appraisal techniques and the extent of their use. You should also be aware that these techniques are a small part of the overall capital-allocation planning process. This includes knowledge of:
- empirical evidence on techniques used;
- the calculation of payback, discounted payback and accounting rate of return (ARR);
- the drawbacks and attractions of payback and ARR;
- the balance to be struck between mathematical precision and imprecise reality;
- the capital-allocation planning process.
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