Question 1

How does the profitability index differ from the net present value and when would each method be preferred?

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Question 2

Explain why the internal rate of return method is more popular than the net present value method. What are some potential problems with relying on the IRR method?

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Question 3

Why are there differences in the capital expenditure analysis practice between large and entrepreneurial firms?

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Question 4

Why is the net present value method of evaluating projects better than the internal rate of return method?

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Question 5

There are various reasons why companies may have difficulty in earning a positive net present value. These reasons include barriers to market entry and other factors. List these factors.

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Question 6

In working with capital budgeting, what does a post-audit do?

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Quiz 10: Capital Budgeting: Decision Criteria and Real Option Considerations