SlideShare ist ein Scribd-Unternehmen logo
1 von 11
Downloaden Sie, um offline zu lesen
Capital Budgeting
Meaning

 “Capital budgeting is the process of
 evaluating and selecting long-term
 investments that are consistent with the goal
 of shareholders wealth maximization. It is
 budget for major capital, or investment,
 expenditures”.
Features

   Potentially large anticipated benefits
   A relatively high degree of risk
   A relatively long time period between the
    initial outlay and anticipated returns
Types of capital budgeting decision

   New machinery, new plants, new products,
   Replacement
   Expansion
   Diversification and
   Research development projects
Classification of investment

   Mutually exclusive
   Independent investment
Process of capital budgeting

   Project Generation
   Project Evaluation
   Project Selection
   Project Execution
   Follow-up
Significance of capital budgeting

   Long term Implication
   Large amount of funds
   Most critical and difficult decision
   It is not Reversible
Capital Budgeting Techniques
 Payback Period
  Expected number of years required to recover a project’s
  cost.
Payback period = E + B
                       C
Where:
E = No. of years immediately preceding the year of recovery
B = Balance amount of investments to be recovered
C = Saving during the year of final recovery
Cont……

    Limitations of Payback:
   Ignores the time value of money. This
    weakness is eliminated with the discounted
    payback method.
   Ignores cash flows occurring after the
    payback period
Cont……..

   Average Rate of return
   Net present value
   Internal Rate of Return
Thank you

Weitere ähnliche Inhalte

Was ist angesagt?

Capital budgeting
Capital budgetingCapital budgeting
Capital budgetingAaqib Badar
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgetingAMALDASKH
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgetingAmeen San
 
New Approach to NPV
New Approach to NPVNew Approach to NPV
New Approach to NPVSandip De
 
Capital budgeting theory
Capital budgeting theoryCapital budgeting theory
Capital budgeting theoryuma reur
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgetingSouman Guha
 
Chapter 09 Capital Budgeting
Chapter 09 Capital BudgetingChapter 09 Capital Budgeting
Chapter 09 Capital BudgetingAlamgir Alwani
 
Npv and IRR, a link to Project Management
Npv and IRR, a link to Project ManagementNpv and IRR, a link to Project Management
Npv and IRR, a link to Project ManagementUjjwal Joshi
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgetingAnkit Jain
 
Costs decisionmaking
Costs decisionmakingCosts decisionmaking
Costs decisionmakingReema Theresa
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgetingKhalid Aziz
 
Investment criteria modified npv,irr
Investment criteria modified npv,irrInvestment criteria modified npv,irr
Investment criteria modified npv,irrTanvi Gupta
 

Was ist angesagt? (19)

Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Capital Budgeting
Capital BudgetingCapital Budgeting
Capital Budgeting
 
New Approach to NPV
New Approach to NPVNew Approach to NPV
New Approach to NPV
 
Npv and irr
Npv and irrNpv and irr
Npv and irr
 
Rate of return
Rate of returnRate of return
Rate of return
 
Ch 10
Ch 10Ch 10
Ch 10
 
2. capital budgeting review
2. capital budgeting review2. capital budgeting review
2. capital budgeting review
 
Capital budgeting theory
Capital budgeting theoryCapital budgeting theory
Capital budgeting theory
 
Investment appraisal techniques
Investment appraisal techniquesInvestment appraisal techniques
Investment appraisal techniques
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Chapter 09 Capital Budgeting
Chapter 09 Capital BudgetingChapter 09 Capital Budgeting
Chapter 09 Capital Budgeting
 
Npv and IRR, a link to Project Management
Npv and IRR, a link to Project ManagementNpv and IRR, a link to Project Management
Npv and IRR, a link to Project Management
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Costs decisionmaking
Costs decisionmakingCosts decisionmaking
Costs decisionmaking
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Investment criteria modified npv,irr
Investment criteria modified npv,irrInvestment criteria modified npv,irr
Investment criteria modified npv,irr
 

Andere mochten auch (10)

Budeting & costing
Budeting & costingBudeting & costing
Budeting & costing
 
Project Mgmt 1
Project Mgmt 1Project Mgmt 1
Project Mgmt 1
 
Capital Budgeting
Capital Budgeting Capital Budgeting
Capital Budgeting
 
Risk analysis in capital budgeting
Risk analysis in capital budgetingRisk analysis in capital budgeting
Risk analysis in capital budgeting
 
RISK ANALYSIS IN CAPITAL BUDGETING
RISK ANALYSIS IN CAPITAL BUDGETINGRISK ANALYSIS IN CAPITAL BUDGETING
RISK ANALYSIS IN CAPITAL BUDGETING
 
Risk analysis in capital budgeting
Risk analysis in capital budgeting Risk analysis in capital budgeting
Risk analysis in capital budgeting
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Event management
Event managementEvent management
Event management
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 
Capital Budgeting
Capital BudgetingCapital Budgeting
Capital Budgeting
 

Ähnlich wie Capital budgeting

Capital Budgeting.pptx
Capital Budgeting.pptxCapital Budgeting.pptx
Capital Budgeting.pptxuday231983
 
Capital Budgeting1.pptx.ppt
Capital Budgeting1.pptx.pptCapital Budgeting1.pptx.ppt
Capital Budgeting1.pptx.ppttanushreesingh23
 
Net Present Value Vs Profitability Index
Net Present Value Vs Profitability IndexNet Present Value Vs Profitability Index
Net Present Value Vs Profitability IndexAseem R
 
Project management
Project managementProject management
Project managementAnish Jojan
 
Process of Capital Budegeting
Process of Capital BudegetingProcess of Capital Budegeting
Process of Capital BudegetingDhruvParikh28
 
ranking of investment projects
ranking of investment projectsranking of investment projects
ranking of investment projectsiamsuperbless
 
FM Ch6 Capital Budgeting.pptx
FM Ch6 Capital Budgeting.pptxFM Ch6 Capital Budgeting.pptx
FM Ch6 Capital Budgeting.pptxBarzalaCarcar
 
Capital Budgeting
Capital BudgetingCapital Budgeting
Capital BudgetingJoseph Mary
 
Group 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdf
Group 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdfGroup 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdf
Group 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdfKristinejoyClaud
 
The capital budgeting process
The capital budgeting processThe capital budgeting process
The capital budgeting processAileen Mae Doroja
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgetingsaurabh2929
 

Ähnlich wie Capital budgeting (20)

Capital Budgeting.pptx
Capital Budgeting.pptxCapital Budgeting.pptx
Capital Budgeting.pptx
 
Capital budgeting overview
Capital budgeting overview Capital budgeting overview
Capital budgeting overview
 
Group g
Group gGroup g
Group g
 
7. capitalbudgeting
7. capitalbudgeting7. capitalbudgeting
7. capitalbudgeting
 
Capital Budgeting1.pptx.ppt
Capital Budgeting1.pptx.pptCapital Budgeting1.pptx.ppt
Capital Budgeting1.pptx.ppt
 
Net Present Value Vs Profitability Index
Net Present Value Vs Profitability IndexNet Present Value Vs Profitability Index
Net Present Value Vs Profitability Index
 
Project management
Project managementProject management
Project management
 
Process of Capital Budegeting
Process of Capital BudegetingProcess of Capital Budegeting
Process of Capital Budegeting
 
INVESTMENT DECISION
INVESTMENT DECISION INVESTMENT DECISION
INVESTMENT DECISION
 
UNIT-1-FDM.pptx
UNIT-1-FDM.pptxUNIT-1-FDM.pptx
UNIT-1-FDM.pptx
 
ranking of investment projects
ranking of investment projectsranking of investment projects
ranking of investment projects
 
FM Ch6 Capital Budgeting.pptx
FM Ch6 Capital Budgeting.pptxFM Ch6 Capital Budgeting.pptx
FM Ch6 Capital Budgeting.pptx
 
Capital Budgeting
Capital BudgetingCapital Budgeting
Capital Budgeting
 
FM2.pptx
FM2.pptxFM2.pptx
FM2.pptx
 
Cfd ppt
Cfd pptCfd ppt
Cfd ppt
 
Investment decision
Investment decisionInvestment decision
Investment decision
 
02_lecture 8.ppt
02_lecture 8.ppt02_lecture 8.ppt
02_lecture 8.ppt
 
Group 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdf
Group 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdfGroup 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdf
Group 3 Capital_Budgeting_Techniques- Dr. Vijay Shankar Pandey.pdf
 
The capital budgeting process
The capital budgeting processThe capital budgeting process
The capital budgeting process
 
Capital budgeting
Capital budgetingCapital budgeting
Capital budgeting
 

Kürzlich hochgeladen

AI in the project profession: examples of current use and roadmaps to adoptio...
AI in the project profession: examples of current use and roadmaps to adoptio...AI in the project profession: examples of current use and roadmaps to adoptio...
AI in the project profession: examples of current use and roadmaps to adoptio...Association for Project Management
 
Patterns of Evolution Slides for Canvas Notes.pptx
Patterns of Evolution Slides for Canvas Notes.pptxPatterns of Evolution Slides for Canvas Notes.pptx
Patterns of Evolution Slides for Canvas Notes.pptxAlexandraSwartzwelde
 
Farrington HS Streamlines Guest Entrance
Farrington HS Streamlines Guest EntranceFarrington HS Streamlines Guest Entrance
Farrington HS Streamlines Guest Entrancejulius27264
 
DORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of Cybersecurity
DORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of CybersecurityDORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of Cybersecurity
DORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of CybersecurityPECB
 
Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...
Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...
Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...DrVipulVKapoor
 
647291105-Ppt-Arts-10-4th-Quarter-1.pdfi
647291105-Ppt-Arts-10-4th-Quarter-1.pdfi647291105-Ppt-Arts-10-4th-Quarter-1.pdfi
647291105-Ppt-Arts-10-4th-Quarter-1.pdfijoemmbrillantes
 
How to create _name_search function in odoo 17
How to create _name_search function in odoo 17How to create _name_search function in odoo 17
How to create _name_search function in odoo 17Celine George
 
What is Property Fields in Odoo 17 ERP Module
What is Property Fields in Odoo 17 ERP ModuleWhat is Property Fields in Odoo 17 ERP Module
What is Property Fields in Odoo 17 ERP ModuleCeline George
 
Writing2, Topic Sentence, Outline, Controlling Idea
Writing2, Topic Sentence, Outline, Controlling IdeaWriting2, Topic Sentence, Outline, Controlling Idea
Writing2, Topic Sentence, Outline, Controlling IdeaNetziValdelomar1
 
The Shop Floor Overview in the Odoo 17 ERP
The Shop Floor Overview in the Odoo 17 ERPThe Shop Floor Overview in the Odoo 17 ERP
The Shop Floor Overview in the Odoo 17 ERPCeline George
 
Objectives n learning outcoms - MD 20240404.pptx
Objectives n learning outcoms - MD 20240404.pptxObjectives n learning outcoms - MD 20240404.pptx
Objectives n learning outcoms - MD 20240404.pptxMadhavi Dharankar
 
How to Override Delete Function in Odoo 17
How to Override Delete Function in Odoo 17How to Override Delete Function in Odoo 17
How to Override Delete Function in Odoo 17Celine George
 
Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024
Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024
Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024St.John's College
 
GA Conference Book Club 2024 - Jay Owens' 'Dust'
GA Conference Book Club 2024 - Jay Owens' 'Dust'GA Conference Book Club 2024 - Jay Owens' 'Dust'
GA Conference Book Club 2024 - Jay Owens' 'Dust'GeoBlogs
 
Pastoral Poetry, Definition, Origin, Characteristics and Examples
Pastoral Poetry, Definition, Origin, Characteristics and ExamplesPastoral Poetry, Definition, Origin, Characteristics and Examples
Pastoral Poetry, Definition, Origin, Characteristics and ExamplesDrVipulVKapoor
 
18. Training and prunning of horicultural crops.pptx
18. Training and prunning of horicultural crops.pptx18. Training and prunning of horicultural crops.pptx
18. Training and prunning of horicultural crops.pptxUmeshTimilsina1
 
How to Make a Field Visible Only for Certain User Groups in Odoo 17
How to Make a Field Visible Only for Certain User Groups in Odoo 17How to Make a Field Visible Only for Certain User Groups in Odoo 17
How to Make a Field Visible Only for Certain User Groups in Odoo 17Celine George
 
4.2.24 The Black Panther Party for Self-Defense.pptx
4.2.24 The Black Panther Party for Self-Defense.pptx4.2.24 The Black Panther Party for Self-Defense.pptx
4.2.24 The Black Panther Party for Self-Defense.pptxmary850239
 
STRAND 5 SST 7 ,,FOR GRADE 7 POLITICAL D
STRAND 5 SST  7 ,,FOR GRADE 7 POLITICAL DSTRAND 5 SST  7 ,,FOR GRADE 7 POLITICAL D
STRAND 5 SST 7 ,,FOR GRADE 7 POLITICAL Dkimdan468
 

Kürzlich hochgeladen (20)

AI in the project profession: examples of current use and roadmaps to adoptio...
AI in the project profession: examples of current use and roadmaps to adoptio...AI in the project profession: examples of current use and roadmaps to adoptio...
AI in the project profession: examples of current use and roadmaps to adoptio...
 
Patterns of Evolution Slides for Canvas Notes.pptx
Patterns of Evolution Slides for Canvas Notes.pptxPatterns of Evolution Slides for Canvas Notes.pptx
Patterns of Evolution Slides for Canvas Notes.pptx
 
Farrington HS Streamlines Guest Entrance
Farrington HS Streamlines Guest EntranceFarrington HS Streamlines Guest Entrance
Farrington HS Streamlines Guest Entrance
 
DORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of Cybersecurity
DORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of CybersecurityDORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of Cybersecurity
DORA, ISO/IEC 27005, and the Rise of AI: Securing the Future of Cybersecurity
 
Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...
Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...
Geoffrey Chaucer Works II UGC NET JRF TGT PGT MA PHD Entrance Exam II History...
 
647291105-Ppt-Arts-10-4th-Quarter-1.pdfi
647291105-Ppt-Arts-10-4th-Quarter-1.pdfi647291105-Ppt-Arts-10-4th-Quarter-1.pdfi
647291105-Ppt-Arts-10-4th-Quarter-1.pdfi
 
How to create _name_search function in odoo 17
How to create _name_search function in odoo 17How to create _name_search function in odoo 17
How to create _name_search function in odoo 17
 
What is Property Fields in Odoo 17 ERP Module
What is Property Fields in Odoo 17 ERP ModuleWhat is Property Fields in Odoo 17 ERP Module
What is Property Fields in Odoo 17 ERP Module
 
Writing2, Topic Sentence, Outline, Controlling Idea
Writing2, Topic Sentence, Outline, Controlling IdeaWriting2, Topic Sentence, Outline, Controlling Idea
Writing2, Topic Sentence, Outline, Controlling Idea
 
The Shop Floor Overview in the Odoo 17 ERP
The Shop Floor Overview in the Odoo 17 ERPThe Shop Floor Overview in the Odoo 17 ERP
The Shop Floor Overview in the Odoo 17 ERP
 
Objectives n learning outcoms - MD 20240404.pptx
Objectives n learning outcoms - MD 20240404.pptxObjectives n learning outcoms - MD 20240404.pptx
Objectives n learning outcoms - MD 20240404.pptx
 
How to Override Delete Function in Odoo 17
How to Override Delete Function in Odoo 17How to Override Delete Function in Odoo 17
How to Override Delete Function in Odoo 17
 
Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024
Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024
Basic cosmetics prepared by my student Mr. Balamurugan, II Maths, 2023-2024
 
GA Conference Book Club 2024 - Jay Owens' 'Dust'
GA Conference Book Club 2024 - Jay Owens' 'Dust'GA Conference Book Club 2024 - Jay Owens' 'Dust'
GA Conference Book Club 2024 - Jay Owens' 'Dust'
 
Pastoral Poetry, Definition, Origin, Characteristics and Examples
Pastoral Poetry, Definition, Origin, Characteristics and ExamplesPastoral Poetry, Definition, Origin, Characteristics and Examples
Pastoral Poetry, Definition, Origin, Characteristics and Examples
 
18. Training and prunning of horicultural crops.pptx
18. Training and prunning of horicultural crops.pptx18. Training and prunning of horicultural crops.pptx
18. Training and prunning of horicultural crops.pptx
 
How to Make a Field Visible Only for Certain User Groups in Odoo 17
How to Make a Field Visible Only for Certain User Groups in Odoo 17How to Make a Field Visible Only for Certain User Groups in Odoo 17
How to Make a Field Visible Only for Certain User Groups in Odoo 17
 
4.2.24 The Black Panther Party for Self-Defense.pptx
4.2.24 The Black Panther Party for Self-Defense.pptx4.2.24 The Black Panther Party for Self-Defense.pptx
4.2.24 The Black Panther Party for Self-Defense.pptx
 
STRAND 5 SST 7 ,,FOR GRADE 7 POLITICAL D
STRAND 5 SST  7 ,,FOR GRADE 7 POLITICAL DSTRAND 5 SST  7 ,,FOR GRADE 7 POLITICAL D
STRAND 5 SST 7 ,,FOR GRADE 7 POLITICAL D
 
CARNAVAL COM MAGIA E EUFORIA _
CARNAVAL COM MAGIA E EUFORIA            _CARNAVAL COM MAGIA E EUFORIA            _
CARNAVAL COM MAGIA E EUFORIA _
 

Capital budgeting

  • 2. Meaning “Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the goal of shareholders wealth maximization. It is budget for major capital, or investment, expenditures”.
  • 3. Features  Potentially large anticipated benefits  A relatively high degree of risk  A relatively long time period between the initial outlay and anticipated returns
  • 4. Types of capital budgeting decision  New machinery, new plants, new products,  Replacement  Expansion  Diversification and  Research development projects
  • 5. Classification of investment  Mutually exclusive  Independent investment
  • 6. Process of capital budgeting  Project Generation  Project Evaluation  Project Selection  Project Execution  Follow-up
  • 7. Significance of capital budgeting  Long term Implication  Large amount of funds  Most critical and difficult decision  It is not Reversible
  • 8. Capital Budgeting Techniques  Payback Period Expected number of years required to recover a project’s cost. Payback period = E + B C Where: E = No. of years immediately preceding the year of recovery B = Balance amount of investments to be recovered C = Saving during the year of final recovery
  • 9. Cont…… Limitations of Payback:  Ignores the time value of money. This weakness is eliminated with the discounted payback method.  Ignores cash flows occurring after the payback period
  • 10. Cont……..  Average Rate of return  Net present value  Internal Rate of Return