Asked by Vaisakh Mukundanunni on Jun 04, 2024
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Three widely used methods of comparing investment alternatives are payback period,net present value,and rate of return on average investment.
Payback Period
The length of time it takes to recover the cost of an investment.
Net Present Value
A method used to evaluate the profitability of an investment or project, calculated by discounting future cash flows to their present value.
Rate of Return
The increase or decrease in value of an investment during a set timeframe, shown as a percent of the investment's original price.
- Identify the various approaches used in assessing capital budgeting.
- Familiarize yourself with the net present value approach and its application in capital budgeting.
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Learning Objectives
- Identify the various approaches used in assessing capital budgeting.
- Familiarize yourself with the net present value approach and its application in capital budgeting.
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