Types of capital budgeting, Financial Management

Types of Capital Budgeting Decisions:

A business organization has to quite normal face the problem of capital investment decisions. Capital investment defines as the investment in projects whose results could be available only after a year. The investment in these projects are reasonably big and to be made immediately, but the returns can be available only after a period of time. The subsequent are some of the cases where capital investment can be useful:

Replacement: Replacements of fixed assets will become essential either on account of their being worn out or becoming dated on account of new technology.

Expansion: A firm can have to expand its production capacity on account of high demand for its products and inadequate production capacity. This will require additional capital investment.

Diversification: A business seems like to reduce its risk by operating in each market rather than in a single market. In such cases, capital investment can become necessary for purchase of new machinery and facilities to hold the new products.

Research and Development: In case of those industries where technology is quickly changing, large sums of money will have to be expended for research and development.

Miscellaneous: A firm may have to invest currency in projects which do not directly help in achieving profit oriented goals. For illustration, installation of pollution control equipment may be essential on account of legal requirements. Therefore, funds will be required for such purpose also. "

Posted Date: 2/14/2013 12:16:40 AM | Location : United States







Related Discussions:- Types of capital budgeting, Assignment Help, Ask Question on Types of capital budgeting, Get Answer, Expert's Help, Types of capital budgeting Discussions

Write discussion on Types of capital budgeting
Your posts are moderated
Related Questions
#question application of an operating.cycle in vegetable growing business.

The data on sales performance in LS Company has shown a important downward trend over the last year. The Marketing and Sales Department is blaming the Finance Department for the po

You are interested in saving money for your first house. Your plan is to make regular deposits into brokerage account which will earn 14%. Your first deposit of $5,000 will be made

What are the characteristics of an efficient market? The term market efficiency denotes to the ease, speed, and cost of trading securities. In an efficient market the securitie

Method to Identify the Component of Seasonal Variation in a Time Series This technique is called as Ratio to Moving Average Method. In this technique, we construct an index wh

Due to the complexity of the tasks involved in many projects, communication of responsibility for those tasks is often helped by means of graphical planning techniques.

Remaining differences with US GAAP IFRS 8 comprise intangible assets as part of the non-current assets. SFAS 131 only refers to tangible assets. IFRS 8 requires method

Question: (a) In the Strategic Planning Model, describe the various stages involved in the generation of capital projects in the public sector. (b) Outline the life cycle-co

What are the advantages and the disadvantages of a new stock issue? A new stock issue increases funds and decreases the riskiness of the firm.  It as well tends to send a negat

Unity of Command Unity of command is the principle in which each subordinate should be responsible to only one manager.