Although the three capital budgeting methods are equivalent, they all can have diﬃculties making computation impossible at times.The most useful methods or tools from a practical standpoint are:

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The most useful methods from a practical standpoint are WACC (Weighted Average Cost of Capital) and Flow-to-Equity. WACC is useful because it assumes projects have constant risk and target debt to value ratios, making it easier to apply in many situations. Flow-to-Equity is also practical as it aligns with how managers often think in terms of optimal debt to equity ratios, despite constant risk.

Although the Three Capital Budgeting Methods Are Equivalent, They All