Grand Canyon FIN 450 Module 1 Discussion Question

Module 1 DQ 1

Financial theory (and the narrative in your textbook) indicates that NPV is the theoretically correct method to use to evaluate capital investments. Yet, surveys of financial managers consistently indicate that IRR is the most widely used technique by practitioners. Why do you suppose this discrepancy exists?

Module 1 DQ 2

Capital budgeting decisions are usually made by teams of executives from various divisions within a corporation. Departmental managers, when presenting their capital budgeting proposals to the executives, are sometimes tempted to inflate the estimates of returns to be earned from their proposals, in order to increase the likelihood that the proposals will be accepted. If you were CFO of a corporation, what steps could you take to prevent this from happening?