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WK_3__DQ1 - positive or negative present value based on the...

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WK 3, DQ 1 Financial managers review capital project initiatives and estimate the benefits and the cost. What is the preferred method of ranking different capital projects? Why is it preferred? Of the four available basic methods ( Return on original investment, payback period method, net present value method and internal rate of return method), the most effective and preferred method is Net Present Value (NPV). The other methods do have some drawbacks. NPV is the preferred method because this method defines whether a capital project will have a
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Unformatted text preview: positive or negative present value, based on the difference between present value inflows and outflows. A project with a negative net present value is rejected. A project with the highest positive net present value will be chosen in the case of two mutually exclusive projects. An NPV or Profitability index can be used to decide which project will be done on non-mutually exclusive projects....
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