what is capital budgeting and techniques of capital
budgeting.
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Answer / sonali
Capital budgeting is a process used by companies to
determine long term investments(machinery,plants, etc.)
Various techniques such as IRR,NPV helps the company to
know the feasibility of any long term investment plan.
| Is This Answer Correct ? | 89 Yes | 3 No |
Answer / ahmed
Capital budgeting:is the planning process used to determin
a firm's long term investement
| Is This Answer Correct ? | 33 Yes | 2 No |
Answer / kavyashree prabhakar
Capital budgeting is the process of managing the long-term
capital of a firm in the most profitable way. The prime
task of the capital budgeting is to estimate the
requirements of capital investment of a business. The
capital allocation to various projects depending on their
needs and selection of proper project for the business also
fall under the canopy of capital budgeting concept.
Some of the major techniques of capital budgeting are:
• Profitability index
• Net present value
• Modified Internal Rate of Return
• Equivalent annuity
• Internal rate of return
| Is This Answer Correct ? | 19 Yes | 1 No |
Answer / pankaj dhawan
Capital budgeting is a required managerial tool.It is the
planning process used to determine whether a firms long term
investment such as new machinery,new plants,new products,&
research development projects are worth pursuing.It is
budget for major capital or investment,expenditures.
| Is This Answer Correct ? | 11 Yes | 4 No |
Answer / shashank
Capital budgeting relates to the below mentioned points:
1 it means to take decision for investment in fixed assets.
2 it means to take decision in regard with money investment
in long term projects.
3 evaluation of the expenditure on the basis of net
outlays....
following are the techniques of capital budgeting...
A- NPV
B- PROFITABILITY INDEX
C- INTERNAL RATE OF RETURN
D- ARR(TRADITIONAL TECHNIQUE)
{IF THERE IS CAPITAL RATIONING THEN WE SHOULD SELECT THE
PROJECTS ON THE BASIS OF PI.
AND IF THERE IS NO SUCH PROBLEM THEN WE SHOULD CONSIDER THE
PROJECT ON THE BASIS OF NPV...}
| Is This Answer Correct ? | 5 Yes | 0 No |
Answer / ram
Capital budgeting is nothing but longterm financing.
| Is This Answer Correct ? | 5 Yes | 1 No |
Answer / ajaykumar chavan
There are a number of techniques of capital budgeting. Some
of the methods are based on the concept of incremental cash
flows from the projects or potential investments. There are
some other techniques of capital budgeting that are based
on the accounting rules and accounting earnings. However,
the techniques based on the accounting rules are considered
to be improper by the economists. The hybrid and simplified
techniques of capital budgeting are also used in practice.
Capital budgeting is the process of managing the long-term
capital of a firm in the most profitable way. The prime
task of the capital budgeting is to estimate the
requirements of capital investment of a business. The
capital allocation to various projects depending on their
needs and selection of proper project for the business also
fall under the canopy of capital budgeting concept.
Some of the major techniques of capital budgeting are:
Profitability index
Net present value
Modified Internal Rate of Return
Equivalent annuity
Internal rate of return
Profitability Index
The profitability index is a technique of capital
budgeting. This holds the relationship between the
investment and a proposed project's payoff. Mathematically
the profitability index is given by the following formula:
Profitability Index = (Present Value of future cash
flows) / (Present Value of Initial investment)
The profitability index is also sometimes called as value
investment ratio or profit investment ratio. Profitability
index is used to rank various projects.
Net Present value
Net present value (NPV) is a widely used tool for capital
budgeting. NPV mainly calculates whether the cash flow is
in excess or deficit and also gives the amount of excess or
shortfall in terms of the present value. The NPV can also
be defined as the present value of the net cash flow.
Mathematically,
NPV = ?(Ct / (1+r)t) - C0 , where the summation takes the
value of t ranging from 1 to n
Here,
n stands for the total project time
t stands for the cash flow time
r stands for the rate of discount
Ct stands for net cash flow at time t
C0 stands for capital outlay when t = 0
Modified Internal Rate of Return
The Modified Internal Rate of Return (MIRR) gives the
measure of an investment's attractiveness in a business.
The prime use of the modified internal rate of return in
the capital budgeting process is to rank various choices of
projects.
Equivalent Annuity
Equivalent Annual Cost is widely used in capital budgeting
as a decision making tool. This is mainly used to compare
different projects having unequal project lifetime.
Internal Rate of Return
The internal rate of return (IRR) is a metric used by the
capital budgeting in order to determine whether the firm
should make investments or not. The IRR indicates the
efficiency of a particular investment.
| Is This Answer Correct ? | 5 Yes | 2 No |
Answer / saraswathi.k
It is Investment decision concerned with the allocation of
given capital to mobilise the fixed assets for the
business. The benefits from the assets are further realised
in future. Thus capital budgeting decision adds to the
total fixed assets of the conern by adopting new investment
plan prior to one year. It is the calculation of future
benefits and minimisation of risks. There are four major
capital budgeting techniques: 1)Pay back method 2) Average
rate of returnmethod 3) Internal rate of return method 4)
Net Present value method.
| Is This Answer Correct ? | 2 Yes | 1 No |
Answer / meenakshi
The process of preparing a plan for the raising of capital
funds and for their development.
| Is This Answer Correct ? | 8 Yes | 9 No |
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