Commonly Used Financial Evaluation Technique

Discussion on Financial Evaluation Technique
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Discussion on Financial Evaluation Technique
The process of selecting capital projects requisites in-depth analysis and multiple trend analysis. Therefore, it is vital for the managers to employ multiple financial evaluation methods before making a decision to accept or reject a project. Nevertheless, selecting the right project can be a complex process particularly when the choice has to be made between mutually exclusive projects (Andor et al., 2015). Hence, in such scenarios, financial analysts have to deploy different methods to rank the projects. Some of the commonly used financial analysis techniques include payback rule, discounted payback period, net present value and internal rate of return. Among these methods, internal rate of return and net present value are the most extensively utilized methods for evaluating different projects and rank them according to the present value of future cash flows. Nevertheless, net present valu...