Bock Construction Company is considering four proposals for the construction of new loading ...

The managers can use the information to determine which proposal is best under the various alternatives. This may be accomplished by ranking each alternative. Also, the managers must determine the factors that are the most important to the company. For example, if short-run risk is high, a short payback period may be highly desirable. In this case proposal 1 is best. However, if total cash returned is critical to the company's operations, then proposal 4 is probably best.

Any time that multiple measures are used there may be confusion because very seldom will one proposal appear to be the best with all models. In this case payback ranks proposal 1 the best, NPV ranks proposal 4 the best, IRR ranks proposal 2 the best, and AARR ranks proposal 1 the best. The importance of each ranking will depend upon the circumstances of the organization and the managers must be attuned as to what is most favourable.