Since capital budgeting includes the process of generating evaluating selecting and following up on capital expenditure alternatives allocation of financial resources should be made by the firm to its new investment projects in the most efficient manner.
Kinds of capital budgeting.
A capital budgeting has long term implications.
Its effects will extend into the future and will have to be endured for a longer period than the consequences of current operating expenditure.
Let us make an in depth study of the kinds and planning period of capital budgeting decisions.
Kinds of capital budgeting decisions.
Capital budgeting is used by companies to evaluate major projects and investments such as new plants or equipment.
Toady we will discuss the different types of capital budgeting.
All the investment decisions which give more return than the cost of capital they are acceptable while the investment decisions which give less return than the cost of capital they are rejected.
Reducing costs means representing obsolete return on assets.
Either increase the revenues or reduce the costs.
1 accept reject decisions.
There are two ways to it.
The most significant reason for which the capital budgeting decisions is taken is that it has long term implications i e.
The crux of capital budgeting is profit maximization.
The increase in revenues can be achieved by expansion of operations by adding a new product line.
The process involves analyzing a project s cash inflows and outflows to.