There are several methods which are used to evaluate capital budgeting decisions. The techniques are: 1. Payback Period 2. Average Rate of Return 3. Net Present Value Method 4. Profitability Index 5. Discounted Payback Period 6. Internal Rate of Return 7. Modified Internal Rate of Return 8. Equivalent Annualized Cost/Benefit Method. 1. Payback Period: It refers to that period within [...]
Project appraisal is the process by which a financial institution makes an independent and objective assessment of the various aspects of the investment proposition for arriving at a financing decision. There are four broad aspects of appraisal: 1. Financial Feasibility 2. Technical Feasibility 3. Economic Feasibility 4. Management Competence. Aspect # 1. Financial Feasibility: The basic data required for a [...]
The following article will guide you to learn about how to prepare a pessimistic and optimistic budget of a firm. In decision-making the first step is usually to make a single 'best estimate' for each item. The worst possible/best possible outcomes can be evaluated from the pessimistic and optimistic attitudes of the decisions made. An optimistic decision maker consider the [...]