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Earlier article explain what’s capital budgeting and its importance.
Append below explains the process, types of capital projects and capital budgeting decisions a firm needs to embark on:
Capital Budgeting Process Involves : - Generating long-term investment proposals which are consistent with a firm’s long term objectives
- Estimating the relevant after-tax incremental cash flows for these project proposals
- Evaluating these cash flows
- Selecting the project that will maximize shareholders’ wealth
- Reevaluating these projects from time to time for control purposes and carrying out post-audits for completed projects.
Types Of Capital Budgeting Projects: - Independent projects-projects unrelated to each other where a decision to accept one project will not affect the decision to accept another
- Mutually exclusive projects-the decision to choose only one project from the many being considered.
Types Of Capital Budgeting Decisions: - Capital Budgeting Decision for Expansion purposes or
- For replacement of existing assets
Click here for ALL TOPICS on Capital Investment Appraisal
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