Alternative Capital Budgeting Methods
- Adjusted present value (APV): adjusted present value, is the net present value of a project if financed solely by ownership equity plus the present value of all the benefits of financing.
- Accounting rate of return (ARR): a ratio similar to IRR and MIRR
- Cost-benefit analysis: which includes issues other than cash, such as time savings.
- Internal rate of return: which calculates the rate of return of a project while disregarding the absolute amount of money to be gained.
- Modified internal rate of return (MIRR): similar to IRR, but it makes explicit assumptions about the reinvestment of the cash flows. Sometimes it is called Growth Rate of Return.
- Payback period: which measures the time required for the cash inflows to equal the original outlay. It measures risk, not return.
- Real option method: which attempts to value managerial flexibility that is assumed away in NPV.
Read more about this topic: Net Present Value
Famous quotes containing the words alternative, capital and/or methods:
“Education must, then, be not only a transmission of culture but also a provider of alternative views of the world and a strengthener of the will to explore them.”
—Jerome S. Bruner (20th century)
“Like cellulite creams or hair-loss tonics, capital punishment is one of those panaceas that isn’t. Only it costs a whole lot more.”
—Anna Quindlen (b. 1952)
“How can you tell if you discipline effectively? Ask yourself if your disciplinary methods generally produce lasting results in a manner you find acceptable. Whether your philosophy is democratic or autocratic, whatever techniques you use—reasoning, a “star” chart, time-outs, or spanking—if it doesn’t work, it’s not effective.”
—Stanley Turecki (20th century)