* NPV rule

* Benefit-cost ratio (BCR)

* Internal rate of return (IRR)

* Payback period (PP).

NPV RULE

BENEFIT COST RATIO (BCR)

The BCR is the ratio of the present value of all benefits/income to the present value of costs. Therefore, the BCR must be more than 1 otherwise the project will not show a profit or positive benefits to the community.

See internal rate of return

See payback period

ADVANTAGES OF THE ALTERNATIVE RULES

**The other rules have greater intuitive appeal than the NPV rule. BCRs of greater or less than 1 carry an immediate intelligibility. An internal rate of return, say of 12%, can be compared with either an agreed discount rate or with the market's notion of what an appropriate rate of return is, analyzed from comparable sales. The length of the payback period tells the decision maker how long he or she must wait before beginning to earn a profit and therefore, is an easy concept to understand.****The IRR provides a rough and ready indicator of the riskiness of the project. Because the rule is heavily influenced by the ratio of income/benefits to costs, projects which rate best against the rule are also those which will be least affected by unexpected increases in costs or decreases in income/benefits.**