Question

Difference between traditional and modern method of capital budgeting

Answer 1

Answer:

The traditional method relies on the non-discounting criteria that do not consider the time value of money, whereas the modern method includes the discounting criteria where the time value of money is taken into the consideration.

Traditional methods

The traditional methods comprise of the following evaluation techniques:

1. Payback Period Method
2. Average Rate of Return or Accounting Rate of Return Method

Modern Methods

The modern methods comprise of the following evaluation techniques:

1. Net Present Value Method
2. Internal Rate of Return
3. Modified Internal Rate of Return
4. Profitability Index

The common thing about both these methods (Traditional and Modern) is that these are based on the cash inflows and the outflows of the project.

hope it helps..

Answer 2

traditional and modern method of capital budgeting

Explanation:

• The traditional or non-discounting methods include the Payback period and the Accounting rate of return method.

• The payback method is also called a payout period method and represents a period in which the total payment is made. Under this method, various investments ranked according to the length of the period.

• The average rate of return takes into accounts the earrings taken form he investments over the life terms and in this various projects are ranked according to their rate of earnings of return.

• The modern method is the NPV IRR and Profitability index. These are time adjusted or discounted cash flow methods. The NPV is a modern method of evaluating modern proposals were the cash flows are considered with the TMV.

• The internal rate return is an interest rate that equates to the present values of the future and takes into account the total cash in and outflow. NPV is calculated in terms of currency and IRR is expressed in terms of percentage.

Learn more about the between traditional and modern method of capital budgeting.

• brainly.in/question/14189422 answered by Brainly User.