There are several measures available to financial managers to assist them in deciding whether a specific project should be undertaken for the benefit of the company, including Average Accounting Return, Internal Rate of Return (IRR), Net Present Value (NPV), and Profitability Index (PI).
1) How are each of these measures computed? Under what circumstances might one or more of the measures be more appropriate than the others for analyzing projects, and why?
2) How do NPV and PI specifically relate to the primary goal of financial management?