Syllabus: AQA - AS and A Level Business
Module: 3.7 Analysing the Strategic Position of a Business (A-level only)
Lesson: 3.7.8 Analysing Strategic Options: Investment Appraisal

Introduction

This section of the AQA A-level Business syllabus, 3.7.8 Analysing Strategic Options: Investment Appraisal, forms a critical part of developing financial literacy and strategic thinking in students. It equips learners with analytical tools to evaluate major financial decisions — a skill essential to commercial awareness and career readiness. Understanding investment appraisal builds student confidence in interpreting data, assessing risk, and making informed business decisions, making it ideal for cross-curricular application and careers alignment. This topic is assessed only at A-level.

Key Concepts

According to the AQA A-level Business specification, students must be able to:

• Understand and apply financial investment appraisal techniques, including:

  • Payback Period

  • Average Rate of Return (ARR)

  • Net Present Value (NPV)

• Interpret investment data, comparing options to support decision-making.

• Evaluate investment decisions based on both quantitative outcomes and non-financial factors, such as:

  • Risk and uncertainty

  • Strategic fit

  • Corporate objectives

  • Stakeholder reactions

• Understand discounting and present value concepts in relation to NPV calculations.

These skills are directly aligned with the quantitative skills outlined in the assessment annex of the AQA syllabus and are crucial for developing evidence-based commercial judgement.

Real-World Relevance

Investment appraisal is used by every major organisation when deciding whether to pursue a new project, such as launching a product or expanding operations. For example:

• Amazon’s investment in warehouse robotics involved an NPV analysis to justify long-term cost savings.

• Netflix’s decision to fund original content was assessed using ARR and break-even timelines to determine viability.

• In the public sector, councils often apply payback and NPV when planning infrastructure such as schools or transport hubs.

These decisions balance projected financial returns with strategic risks, mirroring classroom learning in authentic contexts.

How It’s Assessed

In AQA A-level Business, investment appraisal questions typically appear in:

• Paper 2 (Data response) and

• Paper 3 (Case study-driven essay questions)

Command words include:

• “Calculate” – requiring accurate use of formulae

• “Interpret” – explaining implications of results

• “Evaluate” – assessing the strengths, weaknesses, and overall value of an investment decision

Assessment objectives covered:

• AO1: Knowledge and understanding of techniques

• AO2: Application to real or hypothetical business scenarios

• AO3: Analysis of advantages, limitations, or comparisons

• AO4: Evaluation with justified recommendations

A typical exam task may provide a table of financial data and ask students to compute all three appraisal techniques, then argue which project should be selected based on both financial and qualitative evidence.

Enterprise Skills Integration

This topic naturally embeds several themes from the Enterprise Skills Thematic Framework:

Decision-Making & Problem-Solving

• Evaluating options using numerical and strategic data

• Interpreting uncertainty and risk

• Prioritising based on long-term objectives

Commercial Awareness

• Understanding how organisations create value through capital investment

• Applying financial reasoning in real-world scenarios

• Exploring how finance links with operational, strategic, and marketing considerations

Workplace Readiness

• Reflecting how financial literacy is essential in every role — from project managers to public service decision-makers

In Enterprise Skills simulations and Skills Hub tools, investment appraisal often forms part of wider business strategy decisions, helping students experience realistic consequences of their choices in a safe learning environment.

Careers Links

This topic is closely aligned with Gatsby Benchmarks 4, 5, and 6:

• Benchmark 4: Linking curriculum to careers
  Students learn about roles such as:

  • Financial analysts

  • Project managers

  • Investment consultants

  • Public sector procurement officers

• Benchmark 5: Employer Encounters
  Simulation events or video interviews (within Skills Hub Futures) show how real professionals use these techniques to make strategic decisions.

• Benchmark 6: Experience of Workplaces
  Students engage with simulated investment dilemmas with real stakes — mirroring boardroom-style decisions.

Career pathways this topic supports:

• Finance and banking

• Corporate strategy

• Public policy and infrastructure

• Entrepreneurship (evaluating start-up investments)

Teaching Notes

Teaching Tips:

• Start with a relatable example: “Should the school invest in solar panels or a new IT lab?” This grounds the maths in real decision-making.

• Use structured templates for calculations to reduce cognitive load.

• Introduce decision-making under uncertainty with scenarios — e.g., what if market conditions change?

Common Pitfalls:

• Students often confuse payback with ARR — clear visual timelines can help.

• NPV is conceptually difficult; spend time unpacking discounting and the time value of money.

• Encourage learners to go beyond “which has the best result” and consider qualitative impacts.

Extension Ideas:

• Run a mock investment pitch, where student groups present competing projects to a “board”.

• Introduce real company investment cases and ask students to suggest which tool the business might have used and why.

Recommended Tools:

• Enterprise Skills’ Skills Hub Business: includes interactive decision tools and templates aligned to AQA syllabus points.

• Skills Hub Futures: offers careers-linked scenarios for whole-school delivery — no prep required.