question - The passage below require analysis and break down

Capital budgeting is a process companies use to decide on which projects to invest in. Quantitative tools like net present value (NPV), internal rate of return (IRR), and the payback period can help analysts select the best project.

Decisions on capital expenditures are made to increase a firm's profitability. The net present value method calculates the current value of cash flows on the basis of the cost of capital and derives the value added to the shareholders ' wealth if a project is implemented. NPV uses more practical estimates of reinvestment rates than IRR.

NPV and IRR return conflicting results when there are differences in the timing of cash flows between the projects that have been mutually exclusive. Mutually exclusive projects need to be evaluated individually, (Brigham & Ehrhardt, 2017). As the NPV method uses a reinvestment rate that is close to its current capital cost, the assumptions of reinvestment by the NPV method are much more realistic than those by the IRR method. Therefore, in the evaluation process, the IRR method can not be used. This problem does not occur mathematically when the NPV approach is used. A singularly agree or refuse decision will always be made by the NPV test.

NPV thus provides a better profitability indicator and shareholders' wealth and returns the right accepting or rejecting decision mathematically, irrespective of whether the project has non-normal cash flows or whether there are differences in project size or timing of cash flows. For any given project, higher NPV can be achieved by;

Reducing the cost of the project

Whether start-up or maintenance costs.

Reducing the time span of the project as a long time may deteriorate the value of cash inflows.