Capital budgeting helps companies decide where to allocate their capital for the best returns.

Net Present Value (NPV) is the gold standard; it calculates a project's value in today's money. Accept if NPV > 0.

Internal Rate of Return (IRR) is the project's expected percentage return. Accept if IRR > hurdle rate.

The Payback Period measures how long it takes to recoup the initial investment. It's a simple risk measure.

NPV is generally superior to IRR for comparing mutually exclusive projects.

All rules rely on accurate forecasts of future cash flows.