Kinds Of Capital Budgeting

A capital budgeting has long term implications.

Kinds of capital budgeting.

There are two ways to it. 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. 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 most significant reason for which the capital budgeting decisions is taken is that it has long term implications i e. 1 accept reject decisions. Reducing costs means representing obsolete return on assets. 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.

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. Capital budgeting is used by companies to evaluate major projects and investments such as new plants or equipment. Either increase the revenues or reduce the costs.

Toady we will discuss the different types of capital budgeting. Capital budgeting decision is a simple process in those firms where fund is not the. Kinds of capital budgeting decisions.