Kinds Of Capital Budgeting

The crux of capital budgeting is profit maximization.

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. A capital budgeting has long term implications. 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.

The increase in revenues can be achieved by expansion of operations by adding a new product line. Capital budgeting decision is a simple process in those firms where fund is not the. The most significant reason for which the capital budgeting decisions is taken is that it has long term implications i e. 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. 1 accept reject decisions. Toady we will discuss the different types 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.

Capital budgeting decisions have placed greater emphasis due to the following. The process involves analyzing a project s cash inflows and outflows to. Let us make an in depth study of the kinds and planning period of capital budgeting decisions.