Describe the various approaches available when evaluating investment proposals and compare their relative merits.
1. Payback period
2. Average Rate of Return
Discounted Cash Flow Methods
1. Net Present Value (NPV)
2. Profitability Index based on NPV
3. Internal Rate of Return (IRR)
There are different methods of investment appraisal using which a project can be evaluated. These are broadly classified into Traditional Techniques and Discounted Cash Flow Techniques. All the techniques under these categories are explained in detail along with the method to compute the values.
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