INTRODUCTION
Capital budgeting is the planning of long-term corporate financial projects relating to investments funded through and affecting the firm's capital structure. Management must allocate the firm's limited resources between competing opportunities (projects), which is one of the main focuses of capital budgeting.
Secondly, Capital budgeting is also concerned with the setting of criteria about which projects should receive investment funding to increase the value of the firm, and whether to finance that investment with equity or debt capital. Investments should be made on the basis of value-added to the future of the corporation. Capital budgeting projects may include a wide variety of different types of investments, including but not limited to, expansion policies, or mergers and acquisitions. When no such value can be added through the capital budgeting process and excess cash surplus exists and is not needed, then management is expected to pay out some or all of those surplus earnings in the form of cash dividends or to repurchase the company's stock through a share buyback program.
Choosing between capital budgeting projects may be based upon several inter-related criteria.
(1) Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate in consideration of risk.
(2) These projects must also be financed appropriately.
(3) If no positive NPV projects exist and excess cash surplus is not needed to the firm, then financial theory suggests that management should return some or all of the excess cash to shareholders (i.e., distribution via dividends).
TABLE OF CONTENTS
Cover Page i
Title Page ii
Acknowledgement iii
Table of Contents iv
CHAPTER ONE
- Capital Budgeting Definition 1
- Features and Significance of Capital Budgeting 3
- Characteristics of Capital Budgeting 5
CHAPTER TWO
- The Importance of Capital Budgeting 12
- Problems and Difficulties in capital Budgeting 17
CHAPTER THREE
- Analysis of Risk in Capital Budgeting 19
- Method of Measuring Risk and Illustrations 20
CHAPTER FOUR
- Capital Budgeting Process 31
- Types of Capital Budgeting Decisions 35
- Capital Investment Process 36
References
CHAPTER ONE
- Capital Rationing 40
- Types of Capital Rationing 43
CHAPTER TWO
- Capital Rationing Decisions 44
- Factors leading to Capital Rationing 45
References
Disclaimer: Note this academic material is intended as a guide for your academic research work. Do not copy word for word. Note: For Computer or Programming related works, some works might not contain source codes
CITE THIS WORK
(2014, 09). Capital Budgeting.. ProjectStoc.com. Retrieved 09, 2014, from https://projectstoc.com/read/3334/capital-budgeting-9927
"Capital Budgeting." ProjectStoc.com. 09 2014. 2014. 09 2014 <https://projectstoc.com/read/3334/capital-budgeting-9927>.
"Capital Budgeting.." ProjectStoc.com. ProjectStoc.com, 09 2014. Web. 09 2014. <https://projectstoc.com/read/3334/capital-budgeting-9927>.
"Capital Budgeting.." ProjectStoc.com. 09, 2014. Accessed 09, 2014. https://projectstoc.com/read/3334/capital-budgeting-9927.
- Related Works
- The Role Of Voluntary And Open Membership In Increasing The Efficiency Of Cooperative Societies
- Co-operative And Economic Development [a Case Study Of Oji-river Local Government Area 2000-2004]
- Co-operative And Poverty Alleviation (a Case Study Of The Contribution Towards Poverty Alleviation In Enugu State)
- Effectiveness Of Cooperatives In Coffee Value Chain: An Analysis In Sasiga District Of Oromia Region, Ethiopia
- The Importance Of Studing Economics Of Co-operation As A Qualifying Subject For The Award Of O.n. D In Business Studies (a Case Study Of Institute Of Management And Technology (imt) Cem Department.)
- An Examination Of The Role Cooperation Thrift And Credit Societies To The Development Of Urban Area
- Impact Of Economic Survey Report In The Management Of Co-operative Business Enterprise (a Case Study Of Nkanu West L.g.a Enugu State)
- The Problem Of Group Farmers Co-operatives In The Rural Areas Of Enugu State (a Case Study Of Oji-river Local Government Area Of Enugu State)
- Credit Mobilization: Challenges Of Co-operative Societies In Anambra State: Implications For Rural Development (a Case Study Of Selected Agricultural Cooperative Societies In Awka North And South Local Government Areas)
- Primary Cooperative And Members Socio Economic Well Being