Capital budgeting is the planning process used to evaluate potential major projects or investments. It is the most efficient way to measure the long-term economic and financial profitability of an investment project. Capital budgeting decisions are made primarily to increase the value of a company. Net present value, or NPV, is an excellent way to measure the future value of current investments. This method calculates the present value of cash flows based on the opportunity cost of capital and acquires the value that will be added to the wealth of the shareholders if the business proceeds with the capital project. Net present value helps companies ensure that the initial cost of an investment is less than its future value. Capital budgeting is the planning process used to evaluate potential major projects or investments. It is the most efficient way to measure the long-term economic and financial profitability of an investment project. Capital budgeting decisions are made primarily to increase the value of a company. Net present value, or NPV, is an excellent way to measure the future value of current investments.
Question : If using the NPV approach and the IRR approach results in conflicting accept/reject decisions, which approach should be considered more heavily according to the research?