I think that's right, I did a little bit of double checking just to make
sure I'd covered it in my lessons (I had!) and found a couple of reassuring
passages from popular text books! As has been said these are the prefered
parameters to the IA calculations.
These could be internally set. Alternatively external factors or even custom
and practice within an industry might determine them.
Jewell (4th Ed) mentions, on P361, internal limits re payback and ARR. Table
30.5 on page 365 is also useful.
Marcouse et al describes payback on P186 as a "minimum, or screening,
criterion" but more usefully on P188/9 regarding IRR says that "This rate is
then compared with eiter a PRE-SET CRITERION RATE internal to the firm to
decide if the project PASSES THAT CRITERION, or with the prevailing rate of
interest to see if the project is financially viable".
Marcouses final "issue for analysis" of the IA chapter, on page 190, also
talks about minimum criteria.
Hope this helps
Julie Parton
>From: David Lewis <[log in to unmask]>
>Reply-To: For teachers and lecturers interested in curriculum issues
> affecting the te <[log in to unmask]>
>To: [log in to unmask]
>Subject: Re: AQA a2 business 13.7 understanding criterion levels
>Date: Thu, 8 Nov 2001 22:00:39 -0000
>
>----- Original Message -----
>From: Adam Jacob <[log in to unmask]>
>To: <[log in to unmask]>
>Sent: Wednesday, November 07, 2001 10:39 PM
>Subject: Re: AQA a2 business 13.7 understanding criterion levels
>
>
> > I hadn't noticed this yet. My initial reaction is not to worry too much
> > about it as I understand that the questions are likely to be of a more
> > wide-ranging nature. My best guess is that it is about understanding
> > whether the business should accept the project on the basis of the Inv.
>App.
> > technique.
> >
>
>
>Ditto - certainly having looked at some old papers.
>FWIW, my interpretation of the phrase is that it refers to situations where
>criteria have been set such as "payback within 30 months", or "ARR 10%".
>For example, students need to be able to recognise that a payback period of
>less than the criteria set is a good thing. It's pretty basic, but I think
>that's what it means.
>
>Cheers
>
>David
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