The Factors Affecting Capital Budgeting

7350 Words29 Pages
Abstract Capital budgeting is necessary for large, long term investment projects. However, determining what factors to use in the process can be difficult This research presents the most common procedures used in the capital budgeting process. It provides examples and discusses quantitative as well as qualitative factors in determining which projects to choose. Capital Budgeting Capital budgeting is a process used to determine whether long-term investments, such as capital improvements, research and development, and new products are worth pursuing. If capital budgeting is usually reserved for major capital or investments. Many methods are included in the process of capital budgeting such as payback period approach, discounted pay back approach, discounted cash flow techniques, net present value, internal rate of return, profitability index, and many other techniques. This research will explore the most common capital budgeting tools and what they mean in terms of determining the feasibility of a proposed capital budgeting project. Capital budgeting is typically not used to analyze short-term investments, or for operational decisions that are part of the daily operation of the business. Capital budgeting is usually reserved for strategic long term investment decisions. Capital budgeting involves a process of collecting information on as many factors as possible but will affect the budgeting decisions. These factors are analyzed in terms of their financial affect on the

More about The Factors Affecting Capital Budgeting

Open Document