Capital Budgeting

Project description
READ THE BELOW AND IN 250 WORDS DISCUSS.
Capital budgeting is when a company can determine if their visions/goals for long-term investments, new equipment purchase, buildings, and/or expansions with be a

viable possibility. These decisions are often critical ones made by management. Whatever the decision, an assessment has to be made to ensure the projected inflows and

outflows will generated enough return to meet the company’s benchmark.

The most important objective is “to select investments in productive assets that will increase the value of the firm” Parrino, 2012. Most investments are very

expensive. It is important to the financial stability of the firm that although the investment may cost the firm a lot of money, the return will generate more money

than it cost to the firm to invest. To help analyze the risk and determine if its even worth pursuing the investment, there are certain techniques that may be used to

make a determination. If while utilizing these techniques, the firm finds that the investment is too risk and will not return enough value through the years, it is in

the best interest of the firm to not pursue that particular investment but finds investment opportunities elsewhere that may have long term benefits.

Parrino, R., Kidwell, D. S, & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed). Hoboken, NJ: Wiley.

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