Neither the net present value method nor the internal rate of return method can be used as a screening tool in capital budgeting decisions.

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Lupita Escalera · Accepted Answer

Final Answer : False, Explanation :  Both the net present value (NPV) method and the internal rate of return (IRR) method can be used as screening tools in capital budgeting decisions. The NPV method evaluates a project by calculating the present value of its expected cash flows and subtracting the initial investment. If the resulting NPV is positive, the project is accepted; if it is negative, the project is rejected. The IRR method determines the discount rate that makes the present value of a project's expected cash flows equal to the initial investment. If the resulting IRR is greater than the required rate of return or cost of capital, the project is accepted; if it is less than the required rate of return or cost of capital, the project is rejected. Both methods are useful for comparing different investment options and selecting the best one based on their financial performance.

Neither the net present value method nor the internal rate of return method can be used as a screening tool in capital budgeting decisions.

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