5.3 PROJECT EVALUATION CRITERIA
After the cash flow is estimated in respect of a proposal/project, it is put to evaluation criteria in order to determine whether the proposal/project is to be accepted. Broadly, there are two types of evaluation criteria: First, where cash flow is discounted to the present value and, second, where it is not discounted. The commonly used discounting techniques are:
- Net present value (NPV) method;
- Discounted benefit-cost ratio method;
- Internal rate of return (IRR) method;
- Modified internal rate of return (MIRR) method.
The commonly used non-discounting techniques are:
- Pay-back period method;
- Accounting rate of return.
It is reported that 10-20 per cent of the large US multinational firms use the accounting ...