Question

Rank the following capital budgeting techniques in order of importance: Payback, Discounted Payback, IRR, NPV and MIRR. Why does this order make sense?

Answer 1

Rank 1 - NPV

Rank 2 - IRR

Rank 3 - MIRR

Rank 4 - discount payback period

Rank 5 - payback period

I'm ranking in this order because, NPV is best at any situation for any project so it's rank is1.

Best choosing option is IRR OR MIRR

Then discount payback period than payback period because discount payback period show exact present value recover the initial outlay. But payback period shows generally recover amount of outflow with considering time value of money.