The manager must not only assess each option and discretion. Additionally, Kalhoefer states that the discussion about the best set of practices to be used in capital budgeting has been extensive and dull. Capital budgeting practices are generally classified in the literature as: investment analysis, discount rate setting and risk analysis.
As for the most sophisticated ones, they include sensitivity analysis, scenario analysis, decision tree, Monte Carlo simulation. Use as many pages as are allowed. YES 2. Studies on the subject have had so much simpler goals to identify which practice is used — the more detailed the best —, seeking to explain what discount rates are used, how the cash flows are measured and also which factors are important in capital budgeting decision.
Otherwise, the sophisticated practices include probabilistic risk analyses, such as sensitivity analysis, scenario analysis, decision tree, Monte Carlo simulation, among others. Submit early.