What are the different types of capital budgeting techniques used in practice?

The different types of capital budgeting techniques used in practice include:

1. Payback Period: This technique calculates the time required to recover the initial investment in a project. It is a simple and quick method but does not consider the time value of money.

2. Net Present Value (NPV): NPV calculates the present value of all cash inflows and outflows associated with a project, considering the time value of money. It helps determine the profitability of an investment by comparing the present value of cash inflows to the initial investment.

3. Internal Rate of Return (IRR): IRR is the discount rate at which the present value of cash inflows equals the present value of cash outflows. It helps determine the rate of return on an investment and is used to compare different projects.

4. Profitability Index (PI): PI is the ratio of the present value of cash inflows to the present value of cash outflows. It helps assess the profitability of an investment by considering the time value of money.

5. Accounting Rate of Return (ARR): ARR calculates the average annual profit generated by an investment as a percentage of the initial investment. It is a simple method but does not consider the time value of money.

6. Modified Internal Rate of Return (MIRR): MIRR adjusts the IRR by assuming that cash inflows are reinvested at a specified rate and cash outflows are financed at a different rate. It provides a more accurate measure of profitability than IRR.

These techniques help businesses evaluate and compare investment opportunities to make informed decisions regarding capital budgeting.