The subject of this undergraduate thesis are the methods of evaluation of investment projects. However, in order to be able to evaluate projects, it is necessary to get acquainted with capital budgeting and procedure of investment decision – making because it is needed to determine cash flow of the project on which these methods can be used. And finally, to evaluate, compare and rank investment projects. Capital budgeting is the process of making decisions about company’s long – term investments. The decision on capital budgeting is also called an investment decision while on the other side of the coin there is a financial decision. Making quality investment and financial decisions is the primary task of company’s management with the aim of maximizing the value of the company through the acceptance of profitable projects and rejection of harmful ones. Before valuation methods, types of investment projects will be clarified, and also a process of capital budgeting starting from basic: finding investment opportunities all the way to evaluating and making and investment decision. The valuation of investment projects is based on the cash flow of the investment, so it is really important to be familiar with the steps that precede the final valuation. The fundamental method for evaluating investment projects is the net present value (NPV), which always takes precedence over other methods when making a decision. However, for more detailed analysis and better-quality decisions, other methods are also used. Among the basic methods, in addition to the net present value, we also use Internal rate of return (IRR). In addition to the basic methods, some other methods often used in practise will also be explained in detail, such as payback period if the return on investment is required within a certain period of time or profitability index if projects need to be ranked or compared. Finally, through the example of the entrepreneurial idea of the author of this thesis, we will once again go through all the previously mentioned methods of evaluating investment projects in order to make understanding as simple as possible, but also to encourage thinking about financial freedom and entrepreneurship.