Capital Budgeting Techniques

Capital Budgeting is the process of planning and evaluating expenditures on assets whose cash flows are expected to extend beyond one year. A firm’s growth and its ability to remain competitive depend on a constant flow of ideas for new products, ways to make existing products better, and ways to produce output at a lower cost. Procedures must be established for evaluating the worth of such projects. This lecture basically focus on how do firms make decisions about whether to invest in costly, long-lived assets and How does a firm make a choice between two acceptable investments when only one can be purchased.