Discuss the major capital budgeting methods used by corporations to evaluate projects. Why do many corporations continue to use the payback period method? Which method do you prefer? Explain why you prefer this method.
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First, capital budgeting methods are tools used to evaluate capital projects - projects that provide benefits for the company for more than a year - in deciding whether to allocate capital to a particular project or not.
Second, there are a few capital budgeting methods that managers prefer more than others. These include the net present value (NPV) method, internal rate of return (IRR) method, and the payback method.
Lastly, in this part of the guide, I will discuss each of these methods.
Net present value (NPV) analysis - with this capital project evaluating method, the project's annual cash flows from year 0 (or the time the project was ...
This solution provides a discussion about the different capital budgeting methods.