Which of the following capital budgeting evaluation techniques has the least limitations associated with it?
A)IRR
B)ARR
C)NPV
D)Payback

Question

Quizplus · Accepted Answer

NPV is the most comprehensive and reliable capital budgeting technique as it considers the time value of money, incorporates all cash inflows and outflows associated with the project, and provides a precise estimate of the project's profitability. On the other hand, IRR may give misleading results if there are multiple internal rates of return, and ARR only incorporates accounting profits, not cash flows. Payback period is a simple technique, but it ignores the time value of money and only measures the time required to recover the initial investment. Thus, NPV is the best choice as it provides a more accurate depiction of the project's value.

Which of the Following Capital Budgeting Evaluation Techniques Has the Least