Firms use capital budgeting for their long-term asset investment decisions. Capital budgeting is important because fixed asset investment decisions chart a company's course for the future Capital budgeting is similar in principle to select in which future cash flows are estimated, risks are appraised and reflected in a cost of capital discount rate, and all cash flows are evaluated on Select value basis. The primary methods used in this process are: Net present value Internal rate of return, Modified internal rate of return, and Payback, Projects that firms considerare either independent or mutually exclusive In addition, projects may have normal cash flows or nonnormal cash flows. Whether a project is independent or mutually exclusive will impact the firm's capital budgeting analysis as we will see when we discuss the different decision rules