Correct Answer:
B. Net Book Value
Among the given options, Net Book Value is NOT a method of capital investment appraisal. Capital investment appraisal methods are techniques used to evaluate the financial viability of long-term projects by assessing their expected returns against their costs. These methods focus on future cash flows and profitability.
- Net Book Value (B) is an accounting concept representing an asset's historical cost minus its accumulated depreciation. It is used for financial reporting on the balance sheet and does not provide a forward-looking assessment of a new investment's profitability or cash flow generation.
- Payback (A) calculates the time required to recover an initial investment.
- Net Present Value (NPV) (C) discounts future cash flows to their present value to determine the project's net worth.
- Internal Rate of Return (IRR) (D) calculates the discount rate at which a project's NPV is zero. Both NPV and IRR are sophisticated methods that consider the time value of money, making them robust appraisal tools.