1. The method of analyzing capital budget proposals is an important and frequently hotly contested topic in corporate Finance. Adherents of various methodologies frequently argue their positions vehemently. Compare and contrast different capital budgeting techniques (NPV, IRR, Payback, Discounted Payback). In other words, discuss the advantages and drawbacks of each method.

Process

1. Review carefully the decision methodologies discussed in Chapter 9 in your textbook.
2. Role play: You are interviewing for a job in an entrepreneurial company with the founder. She wants you to institute a formal capital budgeting process for the company.
   1. During the interview the founder expresses her fondness of payback methodology.
   2. She says her father always told her it was the best way to analyze a project.
   3. She attended a seminar at the JCU last month where they talked about NPV but she fell asleep and didnt hear what they said.
   4. She asks you what decision method you would recommend as the new Capital Budgeting guru.
   5. Finally, shed like you to write up a two-page position paper (double spaced) for her to share with her father. What do you say? (Hint: discuss the advantages and disadvantages of capital budgeting methods)