As we are preparing to use the Figures of Merit to evaluate capital investment projects, please discuss the following:
What makes a Net Present Value acceptable and why do we use it in project evaluation?
What does the Benefit Cost Ratio tell you about a project and how would you explain a BCR of 1.76 as a profitability index?
What is the Internal Rate of Return and why do you want a project's discount rate to be lower?
Sample Solution