100%(6)6 out of 6 people found this document helpful
This preview shows page 1 out of 1 page.
Week 6 discussionDiscuss the major capital budgeting methods used by corporations to evaluate projects.The three major capital budgeting methods are Net present Value, Internal Rate of Return, and Payback Period. It is a very important process to weigh different options on whether to expand production or add new equipment to an operation for example. Internal Rate of Return or IRR is when a percentage is used to compare a capital investment to other kinds of investments. Expected returns are divided by the expenditure amount and a percentage produced. A company must then look at all the expenditures and determine what an acceptable return percentage is for a capital investment. This acceptable rate is called a hurdle rate. If the percentage is higher than the hurdle rate, the investment is worth considering. Net Present Value or NPV is a method which considers all the financial factors such as exchange rates, inflation, inflows and outflows over time.