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Capital Budgeting and Investment Appraisal

NPV, IRR, payback, profitability-index, breakeven, and investment-appraisal terms.

Capital Budgeting and Investment Appraisal covers NPV, IRR, payback, profitability-index, breakeven, and investment-appraisal terms.

Use these pages when timing, risk, reinvestment, discount rates, or forecast cash flows change the value conclusion. It sits inside Discounting and Cash Flow, so readers can move up when the broader valuation context matters.

Use the table below to choose the narrower valuation branch before relying on a model input, market multiple, forecast, risk premium, price signal, or recommendation.

What This Branch Covers

AreaUse it for
Breakeven AnalysisCapital-budgeting and operating-analysis tool showing the sales, volume, or margin needed to cover costs.
Internal Rate of ReturnDiscount rate that makes a project’s net present value equal zero, widely used to summarize investment return.
Investment AppraisalCapital-budgeting process for evaluating whether a project, acquisition, or expansion is worth funding.
Net Present ValueDiscounted-cash-flow measure showing whether a project or investment is expected to create value after covering its required return.
Payback PeriodCapital-budgeting measure showing how long an investment takes to recover its initial cash outlay.
Profitability IndexDiscounted-cash-flow ratio showing value created per dollar invested, especially useful when capital is rationed.
PV ChartPV Chart is a capital-budgeting or appraisal tool used to evaluate investment economics, cash flows, or break-even risk.

What to Check

  • Forecast period, free cash flow definition, terminal value method, discount rate, reinvestment assumption, and valuation date.
  • Nominal versus real inputs, pre-tax versus after-tax cash flows, currency, inflation, and timing convention.
  • NPV, IRR, MIRR, payback, annuity, perpetuity, present value, and compounding formula inputs.
  • Scenario, sensitivity, hurdle rate, risk premium, risk-free rate, beta, and cost-of-capital support.
  • Effect on capital budgeting, deal economics, impairment analysis, project approval, or intrinsic value.

Common Mistakes

  • Mixing nominal discount rates with real cash flows.
  • Using accounting earnings when the model requires cash flow.
  • Treating IRR as superior without checking scale, timing, and reinvestment assumptions.
  • Ignoring terminal value sensitivity and forecast uncertainty.

Discounting and cash-flow content is educational and does not provide investment, tax, accounting, project-approval, appraisal, or valuation advice.

In this section

Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.

Breakeven Analysis

Capital-budgeting and operating-analysis tool showing the sales, volume, or margin needed to cover costs.

Internal Rate of Return

Discount rate that makes a project's net present value equal zero, widely used to summarize investment return.

Investment Appraisal

Capital-budgeting process for evaluating whether a project, acquisition, or expansion is worth funding.

Net Present Value

Discounted-cash-flow measure showing whether a project or investment is expected to create value after covering its required return.

Payback Period

Capital-budgeting measure showing how long an investment takes to recover its initial cash outlay.

Profitability Index

Discounted-cash-flow ratio showing value created per dollar invested, especially useful when capital is rationed.

PV Chart

PV Chart is a capital-budgeting or appraisal tool used to evaluate investment economics, cash flows, or break-even risk.

Revised on Sunday, June 21, 2026
Discount Rates