5
Principles of Capital Budgeting
OBJECTIVES
To describe the nature of capital budgeting and also the various steps taken in the process of capital budgeting
To explain the concept of cash flows
To show how the different segments of cash flow are computed
To explain various techniques—discounting and non-discounting—for project evaluation
Capital budgeting deals with the selection of proposals/projects for making long-term investments and their implementation. Its purpose is to yield positive cash inflows that can add to the corporate wealth. This requires a detailed study of the computation of cash flow, and how the cash flow is put into different evaluation criteria. The present chapter deals with these different aspects of capital budgeting. ...
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