The principal capital budgeting models for evaluating information technology projects are the payback method,the accounting rate of return on investment (ROI),the net present value,and the:
A)future present value.
B)internal rate of return.
C)external rate of return.
D)ROPM (real options pricing model).
E)present value of future cash flows.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is a capital budgeting model that measures the profitability of an investment. It is considered a more robust method than the payback method and accounting rate of return. The IRR compares the present value of future cash inflows to the initial project cost, and determines the discount rate that makes the net present value of the project equal to zero. A higher IRR indicates a more profitable project, and it can be compared to the company's required rate of return to determine whether to accept or reject the project.

The Principal Capital Budgeting Models for Evaluating Information Technology Projects