Evaluate the advantages and disadvantages of alternatives to discounted cash flows.
- Describe a scenario in which you would recommend one method as being more effective than others. Draw from your professional experience and/or additional research and provide a rationale for your recommendation.
There are a number of different methods, such as discounted cash flow, net present value (NPV), accounting rate of return (ARR), payback, and internal rate of return (IRR),that can be used to evaluate whether an organization should approve a particular project. Each method has specific advantages and disadvantages and certain scenarios could benefit from the use of a particular method.
