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How many methods are there in capital budgeting? what are
those.
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Answer Posted / prasanna11149@yahoo.co.in
Capital budgeting (or investment appraisal) is the planning
process used to determine whether firm's long term
investments such as new machinery, replacement machinery,
new plants, new products, and research and development
projects are worth pursuing.
Many formal methods are used in capital budgeting,
including the techniques such as
Net present value
Profitability index
Internal rate of return
Modified Internal Rate of Return, and
Equivalent annuity.
These methods use the incremental cash flows from each
potential investment, or project. Techniques based on
accounting earnings and accounting rules are sometimes
used - though economists consider this to be improper -
such as the accounting rate of return, and "return on
investment." Simplified and hybrid methods are used as
well, such as payback period and discounted payback period
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