Define Capital Budgeting And Why Company Will Perform IRR And NPV

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Question 2. Define capital budgeting and why company will perform IRR and NPV
Capital budgeting, also known as investment appraisal, refers to the planning process involved in determining the worthiness of pursuing major capital, long term investments, or expenses. This planning process employs a number of methods, including internal rate of return (IRR), net present value (NPV), payback period, equivalent annuity, profitability index, and real option analysis. NPV estimates the potential value of any project through the valuation of a discounted cash flow (DCF), while IRR is the discount rate generating NPV of zero. Companies should perform NPV to check the level of risk of any investment and IRR to measure the efficiency of investments.
Question 3. Name and define various types and classes of stocks. What are their characteristics?
Companies can have two different types of stock depending on the stage of its growth since most companies require more investments for growth than what the founders and early investors can give. The initial public offering (IPO) distinguishes public companies from privately owned establishments, and based on this fact, companies can have two types of stock: common stock and preferred stock. A majori...