Toady we will discuss the different types of capital budgeting.
Kinds of capital budgeting.
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 decisions.
The process involves analyzing a project s cash inflows and outflows to.
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 crux of capital budgeting is profit maximization.
A capital budgeting has long term implications.
There are two ways to it.
Reducing costs means representing obsolete return on assets.
Capital budgeting is used by companies to evaluate major projects and investments such as new plants or equipment.
The most significant reason for which the capital budgeting decisions is taken is that it has long term implications i e.
Capital budgeting decisions have placed greater emphasis due to the following.
Let us make an in depth study of the kinds and planning period of capital budgeting decisions.
Either increase the revenues or reduce the costs.
The increase in revenues can be achieved by expansion of operations by adding a new product line.
1 accept reject decisions.