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Capital Budgeting for Business Leaders

Capital budgeting is the process of evaluating long-term investment projects to select those that maximize investor wealth. It involves analyzing projects with benefits extending beyond one year using techniques like net present value to determine economic and financial profitability. Capital budgeting decisions are important for businesses to choose proposals that provide the best long-term return meeting or exceeding investor requirements.

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Sneha Kumar
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114 views5 pages

Capital Budgeting for Business Leaders

Capital budgeting is the process of evaluating long-term investment projects to select those that maximize investor wealth. It involves analyzing projects with benefits extending beyond one year using techniques like net present value to determine economic and financial profitability. Capital budgeting decisions are important for businesses to choose proposals that provide the best long-term return meeting or exceeding investor requirements.

Uploaded by

Sneha Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

CAPITAL BUDGETING

DECISION

Capital budgeting is the process of evaluating and selecting


long-term investments that are in line with the goal of
investors wealth maximization.

The expected benefits generally extend beyond one year in the


future. Out of different investment proposals available to a
business, it has to choose a proposal that provides the best
return and the return equals to, or greater than, that required by
the investors.

The capital budgeting decisions are important, crucial and


critical business decisions

OBJECTIVES

OF

STUDY

To understand the concept of Capital Budgeting

To understand the purpose of capital budgeting.

To know the process of capital budgeting

To know the different techniques of capital budgeting.

To know the various capital budgeting decisions

RESEARCH METHODOLOGY

To determine the merits of an investment project

To determine the long-term economic and financial


profitability of any investment project.

To analyze the economic viability of a business project lasting


multiple years and involving capital assets.

To help make decisions that is smart for business.

OBSERVATION
The companies in India do have specific amount of average size
of annual capital budget and all project size requires formal
quantitative analysis.
The companies under study in India seem to be planning one year
in advance only but here also the period of planning is different for
different projects.
This may be due to volatile business environment. The authority
to take final capital budgeting decision rests with the chief finance
officer and top management officials of all the organizations under
study.
The responding firms ranked payback period as the most important
technique followed by internal rate return and net present value. \

CONCLUSION AND
SUGGESTIONS

Capital budgeting methods differ on the basis of nature and size


of a particular project under consideration.

After analysing every aspect of capital budgeting including the


process, techniques, decision involved in choosing the
technique we can conclude that it is one of the most important
decision for the working of the company .

The net present value method, a business estimates all the cash
flows pursuing a project, now and in the future. It then adjusts,
or "discounts," the value of future cash flows to reflect what
they're worth in the present day. It makes this adjustment using
a "discount rate" that takes into account inflation, the risk of the
project and the cost of capital

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