Many small and medium-sized companies tend not to use discounted cash flow techniques when analyzing capital expenditures. Instead, if any analysis of capital expenditures is per- formed, techniques such as the payback method or the simple rate of return are used.

Required:

1. Why might smaller companies prefer to use techniques such as cash payback or the simple rate of return over discounted cash flow techniques?

2. Do you think it is any less beneficial for smaller companies to use discounted cash flow techniques when analyzing capital expenditures than it is for larger companies? Why or why not?