FREE Trial

Under what circumstances will the NPV, IRR, and PI techniques provide different capital budgeting decisions? What are

Question:

Under what circumstances will the NPV, IRR, and PI techniques provide different capital budgeting decisions? What are the underlying causes of the differences often found in the ranking of mutually exclusive projects using NPV and IRR?
Capital Budgeting
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 66% (12 reviews)

IRR NPV and PI can lead to different decisions when they are ...View the full answer


answer-question-section
Answered By
tutor-profile-image
Emel Khan
I have the ability to effectively communicate and demonstrate concepts to students. Through my practical application of the subject required, I am able to provide real-world examples and clarify complex ideas. This helps students to better understand and retain the information, leading to improved performance and confidence in their abilities. Additionally, my hands-on approach allows for interactive lessons and personalized instruction, catering to the individual needs and learning styles of each student.
5.00+ 2+ Reviews 10+ Question Solved
Related Book For  book-img-for-question
Introduction to Corporate Finance What Companies Do

Introduction to Corporate Finance What Companies Do

ISBN: 978-1111222284

3rd edition

Authors: John Graham, Scott Smart

See More Books
Question Posted:
See More Questions

Related Video

NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.

Students also viewed these Corporate Finance questions

Transform Your Business How You Can Intensify Your Customers Experience 1st Edition - ISBN: B09ZCL1BMZ - Free Book