The process involves analyzing a project s cash inflows and outflows to.
Kinds of capital budgeting.
Capital budgeting decisions have placed greater emphasis due to the following.
Capital budgeting is used by companies to evaluate major projects and investments such as new plants or equipment.
The crux of capital budgeting is profit maximization.
Toady we will discuss the different types of capital budgeting.
The increase in revenues can be achieved by expansion of operations by adding a new product line.
Reducing costs means representing obsolete return on assets.
1 accept reject decisions.
Either increase the revenues or reduce the costs.
Its effects will extend into the future and will have to be endured for a longer period than the consequences of current operating expenditure.
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.
The most significant reason for which the capital budgeting decisions is taken is that it has long term implications i e.
It includes all those projects which compete with each other in a way that acceptance of one precludes the acceptance of other or others thus some technique has to be used for selecting the best among all and eliminates other alternatives.
A capital budgeting has long term implications.
There are two ways to it.
Kinds of capital budgeting decisions.