Describe the six models of a capital budgeting decision

Reference no: EM132453044 , Length: word count :- 175

Respond to the following in a minimum of 175 words:

Capital Budgeting Decisions

Question 1: Describe the six models of a capital budgeting decision, which are typically defined as a 'go or no-go' decision. These are -

1. Payback period (standard)

2. Discounted payback period (modified from payback period)

3. Net present value (NPV) (standard)

4. Internal rate of return (IRR) (standard)

5. Modified internal rate of return (MIRR) (modified from IRR)

6. Profitability index (PI) (modified from NPV)

In reviewing these, which one(s) is appropriate for small projects and which one(s) is appropriate for larger projects? Or all they all necessary for any capital budgeting decision? Please choose one of these models and provide an example by showing the model's calculation in action.

Reference no: EM132453044

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