1- (WACC OR DVM)

WACC
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ADV
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1- incorporate all sources of finance
2- provides a rate of return that company must generate from the project to satisy
both,equity and debt holders.
3- used to calculate NPV of the investment

DIS-ADV
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1- does not take into consideration the floatation cost of raising the marginal
capital for new projects
2- CAPM required data hard to obtain like risk free rate, and risk and return of
the market as a whole.
3- CAPM assumptions serving as limitations
-perfect matket
-well diversified invesntment
-of same capital mix which is very difficult to maintain.

DVM
===

2-

NPV
===
ADV
---
1. gives important to the time value of money.The value of money changes over time.
2. cash flow over the life span of the project are considered.
3. Profitability and risk(through cost of capital) of the projects are given high
priority.
4. helps in maximizing the firm's value as calculation reveals the dollar amount
that the project will produce.
5. Projects ranking capabality.

DIS-ADV
-------
1. is expressed in $ terms, not in %.
2. NPV can not give accurate decision if the amount of investment of mutually
exclusive projects are not equal.
3. It is difficult to calculate the appropriate discount rate.
4. NPV may not give correct decision when the projects are of unequal life.
5. Estimations>Initial cost+yearly incomes. unforseen costs may occur leading to
-npv.