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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
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 method or methods adjust the project's net cash flows (NCFs) to recognize the effects of the magnitude, timing, and riskiness of the project's cash flows? IRR and PI NPV, IRR, PI, and discounted PB NPV and PI Conventional PB Read the following statements and categorize whether they characterize the IRR, NPV, PB, or PI decision criteria: This value is expressed in years, or some portion thereof A ratio comparing the present value of cash inflows to the initial investment. If greater than or equal to 1.0, the project is acceptable The value is the discount rate or return at which the project's net present value is zero
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