AFTER STUDYING THIS CHAPTER, YOU SHOULD HAVE A GOOD UNDERSTANDING OF:

1. The payback rule and some of its shortcomings.
2. Accounting rates of return and some of the problems with them.
3. The internal rate of return criterion and its strengths and weaknesses.
4. Why the net present value criterion is the best way to evaluate proposed investments.
5. The modified internal rate of return.
6. The profitability index and its relation to net present value.