Finance -- Capital Budgeting Process

Capital budgeting is a process that involves making of investment decisions by a company as to identify which project is profitable so that the company can invest its capital. The crux of capital budgeting is the allocation of available resources to various proposals. The crucial factor which influences the capital budgeting decision is the profitability of prospective investment. Hence capital budgeting decisions are very vital to any organization.

Capital Budgeting Process :

Capital budgeting is a complex process as it involves decisions relating to the investment of current funds for the benefit to be achieved in the future but the future is always uncertain. The following procedure is adopted in process of Capital Budgeting.



Importance of Capital Budgeting

The importance of Capital Budgeting can be well understood from the fact that an unsound investment decision may prove to be fatal to the very existence of the concern.

The need for Capital Budgeting mainly arises due to –

1. Large investments – Capital Budgeting decisions usually involve large investments of funds but mostly the there is a shortage of funds at every firm. Hence the funds and the resources need to be controlled by the firm
2. Irreversible nature – Once the decision for acquiring a permanent asset is taken, it becomes very difficult to dispose of these assets without incurring heavy loss
3. Long term effect on Profitability – Not only the present earnings of the firm is affected but the future growth and profitability also depend upon investment decisions taken today. So a bad decision today can lead to a downfall tomorrow.

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Below are some of the areas in which we provide Capital Budgeting Assignment Help and Homework Help:

1. Meaning and Importance of capital budgeting
2. Objectives and limitations of capital budgeting
3. Types of investment projects
4. Average rate of return method
5. Net Present Value (NPV) method
6. Benefit/Cost ratio or Excess Present Value index or Profitability Index
7.Determination of Internal rate of return (IRR)
8. Modified internal rate of return (MIRR)
9. Types of appraisal
10. Investment appraisal techniques
11. Pay-back period method
12. Discounted Pay-back period method
13. Mutually exclusive projects
14. Contingent projects
15. Conventional and Unconventional Cash flows

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