Captical budgeting techniques?

1. Traditional Methods are as below,

• Pay Back Period Method
• Accounting Rate of Return Method

2.Discounted Cash Flow method

• NPV
• IRR

There are two types of capital budgeting techniques.

1. Non-discounted cash flow criteria 

2. Discounted cash flow criteria

two are very popular Net present value and Internal rate of return.

NPV discounts the future cash flows convert them into present value and subtract initial cost outlay. If positive take the project

IRR is the hit and trail method to compute the % rate based on cash flows. there can be two IRRs too.  If cash flow changes signs so there could be different IRRs.

NPV and IRR could also give conflicting results. Use NPV in such scenario.

PAY BACH PERIOD

AAR

IRR9INTERNAL RATE OF INTREST