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    Project appraisal techniques

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    Describe which three of these investment criteria you recommend for use at your current (or a former) company for the selection of investment projects.

    a. payback period
    b. average accounting return
    c. internal rate of return
    d. profitability index
    e. net present value

    Discuss any shortcomings.

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    Solution Preview

    The following are the 3 methods recommended, the reason of recommendation and their shortcoming.

    Net Present Value

    Reason to recommend:
    - States whether the project will increase the company's value or not
    - Considers all cash flows
    - Considers time value of money
    - Considers the risk of future cash flows by discounting on company's cost of ...

    Solution Summary

    Solution provides a calculation of the following: payback period, average accounting return, internal rate of return, profitability index and net present value.