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8. Comparison of alternative decision criteria There are four principal decision models for evaluating and selecting investment projects: Net present value (NPV) Profitability index (PI)
8. Comparison of alternative decision criteria There are four principal decision models for evaluating and selecting investment projects: Net present value (NPV) Profitability index (PI) Internal rate of return (IRR) Payback period (PB) Which criteria assume that the project's net cash flows (NCFs) are reinvested at the project's internal rate of return? O IRR O NPV, IRR, and PI OPI O Discounted PB Read the following statements and categorize whether they characterize the IRR, NPV, PB, or PI decision criteria: Statement IRR NPV PB PI This value is expressed in years, or some portion thereof olo o o oo The ratio of the present value of the expected net cash flows over the life of the project to the net investment O o The discount rate that equates the present value of the project's net cash flows with the present value of the net investment O o o O
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