The two most commonly used methods of capital budgeting analysis are the
A)internal rate of return and net present value methods.
B)net present value and payback methods.
C)profitability index and the internal rate of return methods.
D)net present value and discounted payback methods.
E)average accounting return and discounted payback methods.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) and net present value (NPV) methods are considered to be the most commonly used methods of capital budgeting analysis. The IRR calculates the rate of return that would make the NPV of an investment equal to zero, whereas the NPV method calculates the difference between the present value of cash inflows and the present value of cash outflows. Both methods are widely used by businesses to evaluate potential investment opportunities and make informed decisions about capital expenditures.

The Two Most Commonly Used Methods of Capital Budgeting Analysis