Capital budgeting — which methods are valid for project selection? Select the correct list of methods commonly used in evaluating and selecting projects in capital budgeting.

Introduction / Context:Capital budgeting compares long-lived projects competing for scarce capital. Robust evaluation requires time value of money and risk-aware measures. Four widely taught methods are payback, IRR, NPV, and PI, each highlighting a different decision lens.

Given Data / Assumptions:

• We are identifying standard, accepted appraisal methods.
• Projects are mutually exclusive or independent with conventional cash flows.
• Firm has a cost of capital (discount rate) for NPV/PI decisions.

Concept / Approach:Payback measures liquidity speed; IRR estimates a project's implied return; NPV measures absolute value created in currency terms; PI scales NPV by investment to compare projects of different sizes. Sound policy emphasizes NPV/PI for value creation, using payback as a liquidity/risk screen and IRR as a complementary rate-of-return view.

Step-by-Step Solution:List the four methods and their roles: payback (speed), IRR (rate), NPV (value), PI (efficiency).Recognize that all are indeed capital budgeting methods.Therefore choose “All the above”.

Verification / Alternative check:Corporate finance curricula and cost engineering manuals routinely present these four as core decision tools.

Why Other Options Are Wrong:Any single method alone is incomplete; modern practice triangulates across several measures.

Common Pitfalls:

• Relying solely on IRR when cash flows are non-conventional or projects are mutually exclusive.
• Ignoring scale differences that PI highlights, or the absolute value that NPV shows.

Final Answer:All the above