Capital Budgeting

Capital budgeting 
Capital budgeting (or investment appraisal) is the planning process utilize to determine whether an organisations long term investments such(prenominal) as newfangled machinery, replacement machinery, new plants, new products, and research development projects atomic number 18 worth pursuing. It is budget for major capital, or investment, expenditures.

GOAL OF THE FIRM
maximise shargonholder wealth or value of the firm


Investment decision
Dividend decision
support decision



Short term investments
Long term investments

CAPITAL BUDGETING

many another(prenominal) formal methods are used in capital budgeting, including the techniques such as
* Accounting rate of return
* Net present value
* Profitability index
* inborn rate of return
* Modified internal rate of return
* Equivalent annuity

RISKS in Capital Budgeting
Risk refers to the chance that a project will prove to be unacceptable.



In terms of capital budgeting jeopardy refers to the variability in cash flows.
The different types of riskinesss that are confront by entrepreneurs regarding capital budgeting are the followers:
* Corporate risk
* planetary risk
* Stand-alone risk
* Competitive risk
* Market risk
* Project specific risk
* diligence specific risk

A number of techniques to handle risk are used by managers in practice. They range from simple rules of hobble to sophisticated statistical techniques. The following are the popular, not-conventional techniques of handling risk in capital budgeting.
Payback 
Risk-adjusted discount rate 
certainty equivalent
PAYBACK PERIOD
Payback period is the time duration requisite to recoup the investment committed to a project. Business enterprises following payback period use stipulated payback period, which...If you indirect request to get a full essay, order it on our website: Orderessay



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