Capital Budgeting

You have been promoted to the finance manager. Your department is responsible for funding all capital budget projects. Your first task is to determine which of the following method will be used in the process. Select and discuss the method you recommend from the following list:

Net present value (NPV)

Payback period

Average accounting return (AAR)

Internal rate of return (IRR)

Modified internal rate of return (MIRR)

Profitability index (PI)

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Capital Budget

Capital budget projects are used to make the firm maintain its financial goals in a business market. For firms to be viable, the investments done have to produce maximum profits that will enhance all the operations of the company.

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