which method of comparing a number of investment proposals is most suited if each proposal involves different amount of cash inflows ?
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Capital budgeting technique
Replies (4)
I guess NPV is the most preferred one...
NPV = Present value of cash inflows minus present value of cash outflows..
or find out profitablity index... :)
NPV = Present value of cash inflows minus present value of cash outflows..
or find out profitablity index... :)
compute independent NPV and choose highest
If life of each proposal is different, compute independent Equated Annualised NPV of each proposal and choose highest.
If life of each proposal is different, compute independent Equated Annualised NPV of each proposal and choose highest.
NPV should be most suitable method But as per ICAI suggested answer of Nov 2017 ,Profitability index is better .
well, logic is the same and answer will not change. just additional time will be required ro compute PI. May be thats why ICAI prefers PI from us so that we consume more time :p
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