Capital Budgeting is a very important topic in Financial Management. We discussed about the advantages and disadvantages of different capital budgeting techniques (Payback Period, NPV, IRR, …) that...

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Capital Budgeting is a very important topic in Financial Management. We discussed about the advantages and disadvantages of different capital budgeting techniques (Payback Period, NPV, IRR, …) that helps financial managers evaluate projects and make recommendations.


Do you see any examples in your personal life that can be considered as a capital budgeting decisions? How can you use on of the capital budgeting techniques to make a more informative decision?


Alternatively, feel free to post arelevantrecentnews articlerelated to capital budgeting, like the types of decisions that companies have to make will be relevant. Examples are mergers and acquisitions, takeovers, spin-offs, launching of new products, entering new markets etc. Remember to provide a link to the article and state briefly why you think that this article is important.

Answered Same DayMay 02, 2021

Answer To: Capital Budgeting is a very important topic in Financial Management. We discussed about the...

Khushboo answered on May 04 2021
137 Votes
Capital budgeting is considered as an important method for appraising the projects and it helps the financial managers in evaluating the projects and making recommendation on the projects using capital budgeting techniques. There are various techniques of the capital budgeting such as net present value, internal rate of return and payback period method and each method is having their own advantages and disadvantages (Woodruff, Jim. 2019). The selection of the method depends on the management and generally net present value method is considered as best method for the evaluation of the appraisal decision related to new investment. The capital budgeting method is not only important for the financial managers but it also plays an important role in the day to day life (Thompson, Jayne. 2020).
The capital budgeting process is emerged in the time value of money and present value or discounted cash flow analysis for the evaluation of the investment opportunity. It can be used to evaluate the investment made which is $1 today and determination of future value if invested at interest rate of 5%. It will make future value at $1.05 and thus decision can be made accordingly. Similarly when I am deciding to purchase car over the truck capital...
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