Capital budgeting is a technique to evaluate investment opportunities and to make investment decisions. Under capital budgeting, there are several techniques like net present value (NPV) analysis, internal rate of return (IRR) analysis, payback period, and the profitability index (PI) which are used to evaluate the projects. To indicate: the major drawback of payback and the simple rate of return methods.

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Chapter 7, Problem 7.15Q

To determine

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Capital budgeting is a technique to evaluate investment opportunities and to make investment decisions. Under capital budgeting, there are several techniques like net present value (NPV) analysis, internal rate of return (IRR) analysis, payback period, and the profitability index (PI) which are used to evaluate the projects.

To indicate: the major drawback of payback and the simple rate of return methods.

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