Your company needs to replace a substantial piece of equipment and is considering three different options. You want to make a good decision and will have to justify your choice by explaining to your manager how you made the decision. He doesn't have much background in finance so you want to limit it to one decision criteria. You will therefore choose:

• Accounting rate of return because you know your manager likes to work with percentages.

• Net present value because you know it will ensure that you choose the option that will add the most value to the company.

• Payback because it is so quick and easy to calculate.

• Internal rate of return your manager understands percentages.

• Profitability index because it will ensure you choose the most profitable option.