What are the different methods used for closing projects in capital budgeting?

There are several methods used for closing projects in capital budgeting, including:

1. Payback Period: This method calculates the time required to recover the initial investment in a project. The project is closed when the payback period is achieved.

2. Net Present Value (NPV): NPV calculates the present value of all cash inflows and outflows associated with a project. If the NPV is positive, the project is considered financially viable and can be closed.

3. Internal Rate of Return (IRR): IRR is the discount rate at which the NPV of a project becomes zero. If the IRR exceeds the required rate of return, the project can be closed.

4. Profitability Index (PI): PI is the ratio of the present value of cash inflows to the present value of cash outflows. If the PI is greater than 1, the project is considered profitable and can be closed.

5. Accounting Rate of Return (ARR): ARR calculates the average annual profit generated by a project as a percentage of the initial investment. If the ARR meets the desired rate of return, the project can be closed.

6. Modified Internal Rate of Return (MIRR): MIRR adjusts the cash flows of a project to reflect the reinvestment rate of cash inflows. If the MIRR exceeds the required rate of return, the project can be closed.

These methods help in evaluating the financial viability and profitability of a project, allowing decision-makers to determine whether to close or continue with the project.