I don’t understand this Writing question and need help to study.
Capital Budgeting and Risk Analysis
- Define the most important capital budgeting techniques. name at least two (2) capital budgeting techniques (e.g., NPV, IRR, Payback Period, etc.) that you used to arrive investment decision.and this is the response to the student also
1-Major capital budgeting techniques are:
- Net Present Value
- Internal Rate of Return
- Payback Period and Profitability Index
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.