Capital Budgeting

You have been promoted to Finance Manager (Congratulations!). Your department is responsible for funding all capital budget projects. Your first task is to determine which of the following methods will be used in the process. After summarizing each method, select and discuss the method you recommend from the following list (and why you selected that particular method):

Net present value (NPV)

Payback period

Average accounting return (AAR)

Internal rate of return (IRR)

Modified internal rate of return (MIRR)

Profitability index (PI)