A-Level Business: Investment Appraisal, an E-bike Fleet or a Tour Van?

Students calculate payback, ARR and NPV for two projects at a seaside bike hire business, test how a weaker forecast changes the answer and recommend one project.

What students do

• Match payback, ARR and NPV to what each one measures
• Calculate payback and the average rate of return for an e-bike fleet and a tour van
• Complete a net present value table at 8% and explain why later cash is worth less today
• Test how a 20% weaker forecast changes NPV and payback, then write a recommendation with one limitation of investment appraisal

What the teacher gets

• A lesson plan for about 55 minutes of tasks, with a shorter 45-minute version. Allow longer in the timetable for handing out and feedback
• Worked answers for every calculation, with the conventions used for rounding and the ARR base
• Indicative guidance for the written recommendation. It is not an exam board mark scheme and carries no marks or grades
• Editable Word versions of both files, so you can change the business or the figures

Specification

Edexcel A level Business (9BS0), Theme 3, section 3.3.2 Investment appraisal: simple payback, average rate of return, net present value, interpreting the results and the limitations of these techniques. Checked against the Pearson specification, Issue 1, September 2014. The business and every figure are fictional and the questions are original. This is not a Pearson resource, and the lesson has not yet been tested in a classroom.