Introduction to Budget Methods for Making Decisions

What you’ll learn to do: Differentiate between the different capital budget methods

A person working with graphs and using a calculator.

There are several methods to determine capital budgeting decisions.  The payback method, internal rate of return, net present value and simple rate of return will be discussed. Most methods will use cash flow to determine which capital budgeting decisions to make.

Purchase price and how much we can expect to cash flow each year from various options will be needed to do analysis on these decisions. Let’s take a look at these methods in detail.