SAB7#022 Project Selection Method

SAB7#022 Project Selection Method

1. Payback Period

   • Choose the nearest Date
   • Payback period intuitively measures how long something takes to "pay for itself."

2. Present Value

   • The operation of evaluating a present sum of money some time in the future is called a capitalization (how much will 100 today be worth in 5 years?)

3. Internal Rate of Return- IRR

   • Choose the highest
   • IRR is a rate of return used in capital budgeting to measure and compare the profitability of investments.

4. Cost-Benefit Analysis

   • Choose above 1
   • CBA is a systematic approach to estimating the strengths and weaknesses of alternatives that satisfy transactions, activities or functional requirements for a business.

5. Net Present Value - NPV

   • Choose the highest
   • NPV is determined by calculating the costs (negative cash flows) and benefits (positive cash flows) for each period of an investment

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