capital budgeting

CAPITAL BUDGETING Capital Expenditures A expenditure that generates a cash flow benefit for more than one year is called a capital expenditure. Some examples include the purchase of new equipment, expansion of production facilities, buying another company, acquiring new technologies, or launching a research & development program. A capital expenditure involves large cash outlays with implications on future values of a company. Once committed to making a capital expenditure it is sometimes difficult to back out. …

…of financial management. Three good economic criteria are Net Present Value, Modified Internal Rate of Return, and Discounted Payback. People need to manage project risk differently than we would manage uncertainty. We have several tools to help us manage risks, such as increasing the discount rate. We also need to implement post analysis and tracking of projects after we have made the investment. This helps eliminate errors in the capital budgeting process. Work Cited Page