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Capital budgeting is the process of evaluating and selecting

long-term investments that are in line with the goal of
investors wealth maximization.

The expected benefits generally extend beyond one year in the

future. Out of different investment proposals available to a
business, it has to choose a proposal that provides the best
return and the return equals to, or greater than, that required by
the investors.

The capital budgeting decisions are important, crucial and

critical business decisions




To understand the concept of Capital Budgeting

To understand the purpose of capital budgeting.

To know the process of capital budgeting

To know the different techniques of capital budgeting.

To know the various capital budgeting decisions


To determine the merits of an investment project

To determine the long-term economic and financial

profitability of any investment project.

To analyze the economic viability of a business project lasting

multiple years and involving capital assets.

To help make decisions that is smart for business.

The companies in India do have specific amount of average size
of annual capital budget and all project size requires formal
quantitative analysis.
The companies under study in India seem to be planning one year
in advance only but here also the period of planning is different for
different projects.
This may be due to volatile business environment. The authority
to take final capital budgeting decision rests with the chief finance
officer and top management officials of all the organizations under
The responding firms ranked payback period as the most important
technique followed by internal rate return and net present value. \


Capital budgeting methods differ on the basis of nature and size

of a particular project under consideration.

After analysing every aspect of capital budgeting including the

process, techniques, decision involved in choosing the
technique we can conclude that it is one of the most important
decision for the working of the company .

The net present value method, a business estimates all the cash
flows pursuing a project, now and in the future. It then adjusts,
or "discounts," the value of future cash flows to reflect what
they're worth in the present day. It makes this adjustment using
a "discount rate" that takes into account inflation, the risk of the
project and the cost of capital