Capital Budgeting Techniques
Capital Budgeting Technique 1. Introduction to Capital Budgeting Capital Budgeting refers to the process of evaluating and selecting long-term investment projects that require large capital expenditure and provide benefits over several years. Examples Purchase of machinery Expansion of business Construction of a new building Launch of a new product 2. Importance of Capital Budgeting Capital budgeting is important because it: Involves huge financial commitment Affects long-term profitability Helps in efficient allocation of resources Reduces investment risk Ensures wealth maximization of owners 3. Uses of Capital Budgeting Selection of profitable projects Long-term financial planning Control over capital expenditure Comparison of alternative investments Strategic decision-making 4. Capital Budgeting Techniques Capital budgeting techniques ar...