MANAGEMENT

Detailed explanation-1: -The Net Present Value (NPV) method involves discounting a stream of future cash ows back to present value. The cash ows can be either positive (cash received) or negative (cash paid). The present value of the initial investment is its full face value because the investment is made at the beginning of the time period.

Detailed explanation-2: -Internal Rate of Return method computes the discount rate at which the difference between the present value of an investment project’s future net cash flows and net initial cash outflows is 0, i.e., the IRR is the discount rate that sets the NPV to 0.

Detailed explanation-3: -Net present Value (NPV) Method: This is one of the widely used methods for evaluating capital investment proposals. In this technique the cash inflow that is expected at different periods of time is discounted at a particular rate. The present values of the cash inflow are compared to the original investment.

Detailed explanation-4: -The equivalent annual annuity approach is one of two methods used in capital budgeting to compare mutually exclusive projects with unequal lives. When used to compare projects with unequal lives, an investor should choose the one with the higher equivalent annual annuity.