Assess non-financial investment factors
Balance appraisal figures with operational, social, environmental and strategic effects.
Section 4.4 · Investment appraisal
Exam scope and assessment notes
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. This topic covers future net cash flows, payback, ARR, NPV, IRR and supported investment decisions. Discounted payback and questions involving a residual value at the end of a project are excluded by Cambridge. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use AS Topics 1.5–1.6 for profit, depreciation and financial analysis, and Topic 2.1 for contribution. Keep accounting profit, project cash flow and the time value of money distinct.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which is a non-financial investment factor?
What you will learn
- Identify relevant non-financial factors
- Connect factors to the decision
- Support a balanced recommendation
Financial returns are not the whole decision
Investment can affect quality, worker safety, training, employment, customer service, suppliers, environment, legal duties and long-term strategy.
A factor matters when it changes feasibility, costs, benefits or stakeholder outcomes. Explain the link instead of listing generic concerns.
State how a factor could change the choice
A project with positive NPV may still be unacceptable if it creates an unmanageable safety or legal risk. A lower financial return may be justified by an important service or environmental objective.
Quantify a factor where credible data exist. Do not pretend an unmeasured effect has a precise monetary value.
Pause and explain
A project saves money but may reduce service reliability. What should decision-makers do?
Worked example
A machine has positive NPV but increases noise exposure. Give two questions for the decision.
Show the worked solution
- Check whether exposure can meet safety requirements.
- Estimate mitigation cost and operating changes.
- Assess worker wellbeing and production effects.
Answer The NPV supports the project financially, but approval should depend on a safe operating plan and effective mitigation.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A project has NPV $40,000 but removes 12 local roles. State one financial and two non-financial points to assess.
Give me a hint
Connect the forecast result with affected people.
Compare my reasoning
- Positive NPV is conditional on the stated cash assumptions.
- Assess workforce transition and local employment.
- Check retraining, redeployment or redesign options.
The forecast is financially positive, but assess employees and realistic transition options before recommending.
Look for these in your work
- NPV qualified
- Employment impact stated
- Mitigation considered
A delivery system has NPV $75,000 but may lengthen delivery times. What evidence should a decision paper add?
Give me a hint
Test customer effects and connect them to objectives.
Compare my reasoning
- Estimate time changes for customer groups.
- Check complaints, retention and service commitments.
- Include redesign cost and recalculate the return if mitigated.
Add service-time evidence, customer impact and mitigation cost; reassess the forecast and service objective.
Look for these in your work
- Outcome quantified
- Stakeholder effect
- Financial consequence reviewed
A clean-energy project has lower NPV than an alternative, but the organisation has a binding emissions target. How should it present the choice?
Give me a hint
A mandatory objective changes which options are feasible.
Compare my reasoning
- State both NPVs and the emissions requirement.
- Check whether the lower-NPV option meets financial constraints.
- Explain the cost and trade-off of meeting the target.
Present financial difference and binding objective together, then recommend a feasible option transparently.
Look for these in your work
- Both evidence types
- Constraint recognised
- Trade-off explained
Common mistakes
- Listing factors without linking them to the project
- Assuming NPV overrides safety or legal limits
- Inventing precise monetary values for uncertain impacts
What can you explain now?
How should a non-financial factor appear in a recommendation?
Compare with the explanation
Explain its effect on feasibility, stakeholders or objectives
A relevant factor connects to real project consequences.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Name two non-financial factors and explain how each could change a project choice.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.