Question: Why is the NPV considered to be the best method for capital budgeting? What does the NPV tell you? What are the limitations of the

Why is the NPV considered to be the best method for capital budgeting? What does the NPV tell you?

What are the limitations of the payback period as an investment decision criterion? What are its advantages? Why do you think it is used so frequently?

When a firm finances a new investment, it often borrows part of the funds required, so the interest and principal payments this creates are incremental to the projects acceptance. Why are these expenditures not included in the projects cash flow computation?

What are sunk costs, and how should they be considered when evaluating an investments cash flows?

How should flotation costs be incorporated into the firms analysis of net present value?

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