Capital budgeting is the process by which long-term fixed assets are evaluated and possibly selected or rejected for investment purposes. The purpose of capital budgeting is to evaluate potential projects for possible investment by the firm.

Address all of the following questions in a brief but thorough manner.

• What are the various methods for evaluating possible capital projects, in terms of their possible benefits to the firm? Describe the benefits and/or shortcomings of each.
• What is the NPV profile and what are its uses?