Hi, welcome back to finance for non-finance professionals. What I'd like to talk about now is kind of putting together all the capital budgeting tools that we've talked about. Net present value, IRR, pay back and accounting ratios. And think about using all those metrics and how they sort of hang together. Most CFOs rely on multiple metrics, which is something I've sort of articulated in each of these videos, is that, there are costs and benefits to doing things like payback, and IRR, net present value, and accounting ratios. And what's important to realize is that each one of those data points represents some interesting piece of information. What's good about doing lots of different capital budgeting tools Is it rounds out the sort of portfolio of tools that we can bring in to help make good financial decisions. So John Graham and Camp Harvey of Duke University run a survey where they asked CFOs, what capital budgeting metrics do you use in practice? Now what came back was kind of interesting, and I think generally consistent of what we've been talking about. The most popular two, by far, with 76% of respondents and 75% of respondents, was internal rate of return and the net present value. Now those were both really good because when we talked about those, I'll put smiley faces on them, we really liked those metrics. IRR gets the smiley face too, maybe not as big as NPV. Okay, then we talked about p0ayback period. That's also a very popular measure. 57% of CFO's that they use payback period in helping them make capital budgeting decisions. When we talked about payback period though, we were a little bit hesitant of recommending it. I'll put kind of a straight face there. It has some arbitrary parts of it. It doesn't really affect the timing or the risks of the project. And so, again, payback period is okay. More money sooner is better. But I would be cautious about using payback. IRR and NPV or the gold standard payback a little bit sketcher. Now we could also use earnings multiples, another one of those accounting ratios that we talked about. But we were, again, not very excited about using those. Payback and account rates of return are less frequently used. And when you see them used in practice, it's a good idea for you to sort of push back. When you see other capital budgeting tools that we've talked about, and you see a manager making a capital budgeting decision based on profitability index and earnings multiple and a payback ratio, you should now have the skills, knowledge, and ability to say, hey, maybe we should calculate at present value. What's our discount rate? Let's calculate an internal rate of return. Let's put it back, let's put it next to that return on invested capital or that payback period, so that we could make maybe a better decision. It's your job, now, to go out into the field and help CFO's, especially at smaller companies that might have historically only used payback. It's your job now to go out in the field and help them make better financial decisions by using some of the capital budgeting tools that have sort of a better theoretical and empirical foundation. So NPV should always be your first approach. IRR helps put NPV in perspective by shrinking it into a percentage return. NPV and IRR should always be used in the capital budgeting process. Payback can be useful, especially if two NPV's are close, one has a much better payback/ There's nothing wrong with using payback to help round out that capital budgeting decision. Accounting ratios is can be informative, especially for internal mechanisms of control, but I would be cautious of using the accounting ratios tha don't necessarily reflect timing, risk, and cash creation. So NPV, IRR, are the gold standard. Use payback, use the accounting ratios, PE multiples, return on invested capital, use them, but use them cautiously. NPV and IRR should be the go-to capital budgeting tools.