The two most commonly used methods of capital budgeting analysis are the
A)internal rate of return and net present value methods.
B)net present value and payback methods.
C)profitability index and the internal rate of return methods.
D)net present value and discounted payback methods.
E)average accounting return and discounted payback methods.

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) and net present value (NPV) methods are the two most commonly used methods of capital budgeting analysis because they take into account the time value of money and provide a more accurate measure of profitability. The NPV calculates the present value of future cash flows minus the initial investment, while the IRR calculates the rate of return that makes the NPV zero. Both methods are widely used in corporate finance and investment analysis.

The Two Most Commonly Used Methods of Capital Budgeting Analysis