Before making capital budgeting decisions, finance professionals often generate,

Question

Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm's strategic goals. Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that apply. The discounted payback period improves on the regular payback period by accounting for the time value of money. For most firms, the reinvestment rate assumption in the MIRR is more realistic than the assumption in the IRR. Because the MIRR and NPV use the same reinvestment rate assumption, they always lead to the same accept/reject decision for mutually exclusive projects. is the single best method to use when making capital budgeting decisions.

Explanation / Answer

The correct conclusions are:

Discounted payback period improves on the regular payback as it considers time value of money.

MIRR and NPV are same reinvestment assumtions they always give same decisons.

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