Kinds Of Capital Budgeting

Its effects will extend into the future and will have to be endured for a longer period than the consequences of current operating expenditure.

Kinds of capital budgeting.

There are two ways to it. 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. 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. 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.

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. Reducing costs means representing obsolete return on assets. Kinds of capital budgeting decisions.

Let us make an in depth study of the kinds and planning period of capital budgeting decisions. Capital budgeting decision is a simple process in those firms where fund is not the. The increase in revenues can be achieved by expansion of operations by adding a new product line. The crux of capital budgeting is profit maximization.

Either increase the revenues or reduce the costs. The process involves analyzing a project s cash inflows and outflows to. Toady we will discuss the different types of capital budgeting.