Most Popular Capital Budgeting Methods

If we talk about the global scenario, 

Under non – discounted cash flow category: Payback period is the most popular technique used worldwide.

Under discounted cash flow category: NPV (Net present value) & IRR (Internal rate of return) are the most popular methods.

Please have a look at the chart which shows the ranks of capital budgeting techniques based upon preference of respondents on a scale of 0 (never) to 4 (always) in 4 countries such as USA, UK, Germany & France. 

Source: As per report published by Graham & Harvey Surveys (2001) & Brownen, Dejong & Koedijk Survey report (2004) 

Below mentioned findings were further highlighted by similar surveys.

1. In European countries, most of the companies prefer Payback period method for making capital budgeting decisions.

2. In USA, IRR is still the favourite while taking decisions. Thereafter, NPV & Payback period is considered.

3. Companies managed by MBA degree holders have a strong preference for discounted cash flow techniques such as NPV / IRR.