Question

What is Capital Budgeting? Explain the nature and types of capital Budgeting
decisions? Why do you think that capital budgeting decisions are important for
. the firm?

Answer 1

Answer:

What Is Capital Budgeting?

Capital budgeting gives a business a useful financial measurement mechanism for its more pricier capital expenditures, for things like new equipment purchases, maintenance and upgrading existing company equipment, and new building, building maintenance and renovation purchases.

By and large, capital budgeting uses multiple calculations to rank and assess capital expenditures and large-scale projects, with these measurement models the most prominent:

Future capital accounting profit by period (for example, by quarter or year.)

Future cash flows by period (also by quarter or year, in most cases.)

Present value of company cash flows, i.e. discounting those cash flows with a specific interest rate.

The total amount of years needed to repay the original capital investment, as measured on a cash flow basis.

A risk review tied to with the urgency of a company's expenditure on a large project