Capital Budgeting and the Decision to Invest
After studying this chapter, you should be able to understand:
- Capital budgeting is the process, which involves the planning of the capital expenditures in the various investment projects.
- Capital budgeting or the planning of long-term expenditures is very crucial for a firm.
- Capital budgeting can increase the value of a firm.
- If the present value of the future cash flow from the project is smaller than the initial cost of the project, then the firm should not undertake the project.
- The firm will determine its optimum stock of capital by producing at the level, where the marginal revenue productivity of capital equals the marginal cost of capital.
- In deciding among two or more projects, ...