Average return on assets or equity methods


Question 1: Why do most companies prefer to use the present value or internal rate-of-return methods to value capital expenditures, rather than the payback method or average return on assets or equity methods?

Question 2: In compiling the forecasts for the annual cash flows in a capital expenditure solution, interest or depreciation are not included in the cash flows. Why is it accurate to follow this procedure?

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Finance Basics: Average return on assets or equity methods
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