Capital Budgeting

2607 WordsApr 28, 201411 Pages
Capital Budgeting Introduction Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the firm's goal of maximizing owner wealth. A firm using capital budgeting, their goal is to see if there fixed income will cover itself for profit. Fixed incomes are things such as land, plant and equipment. When a firm using a machine to produce its good or service. They most of the time what the machine to produce the amount that they paid for the machine and more. The capital expenditure is the outlay of fund that a firm expects to produce and benefit with in a one year. The Capital Budgeting Process When approaching the problem of trying to the measure capital budgeting. The first step in…show more content…
If Ransack sold the system for $$99,852, how much recaptured depreciation would result? Recaptured depreciation=Sale price-Book value, Book value=Installed cost of the asset-Accumulated depreciation, INPUT Installed Cost = 159,000 Depreciation = 112,890 Selling Price = 99,852 = CALCULATIONS = Book Value = 46,110 Recaptured Dep. = 53,742 Global Capital Budgeting In the international business world firms also use the Capital budgeting process. When entering in to the international market there a couple of thing that are measured different. The First thing is the cash outflows and inflows that occur in foreign currently Companies face long-term and short-term currency risk related to both the invested capital and the cash flows resulting form it. The Second thing is the foreign investment entail potentially significant political risk. Political risks can be minimized by using both operating and financial strategies. TECHNOLOGY When discussing capital budgeting, one must include the effects of technology. Technology assessment can support the capital budgeting process by providing key information for making decisions about capital requests. Technology assessment has been defined as a method for evaluating the effectiveness of equipment, drugs, and clinical procedures.(e) However, in terms of capital equipment planning, technology assessment can be defined more

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