Investment options.

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1. Please help to find out how companies (any one) chose investment options (for example investment appraisal) & undertake their budgeting procedure.

Most companies will use capital budgeting when choosing between various investment options by measuring each option's potential to determine whether or not the investment is worthwhile. There are three main methods companies use in the capital budgeting: internal rate of return, net present value, and payback period. The internal rate of return (IRR) is the discount rate used in capital budgeting to make the net present value of all cash flows from a particular investment equal to zero. The higher the investment's IRR, the more desirable it is, therefore, the investment with the highest IRR would probably be considered the best. The net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows and is used to compare the value of a dollar today to the value of that same dollar in the future. If the NPV of an investment is positive, it should be accepted but if it is negative, it should be rejected because cash flows will also be negative. Finally, the ...