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Capital Budgeting and Risk Analysis

1-Major capital budgeting techniques are:

NPV- sum of the present value of all future cash flows that the investment is going to generate.

IRR- rate of return of the investment or the rate of return where the investment will break even.

The payback period is the time that the investment will take to recoup its invested funds.

The profitability index- ratio of the total of discounted cash flows to the invested capital. It indicates how profitable an investment is.

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