Chapter 8
Capital Budgeting
Capital budgeting is deciding which investments the business should make or, in other words, what the business should spend money on. Intelligent capital budgeting is at the core of a growing company. Conversely, foolhardy capital budgeting has led companies of all sizes to ruin. Capital budgeting is the financial function that most directly affects the strategic direction of the firm, and, indeed, the capital budgeting plan and the strategic plan need to be in synch for either to be successful.
Like most strategic financial decisions, capital budgeting is one-part science and one-part art. In this chapter we will go over several well-accepted practices for deciding which investments a company should choose. However, ...
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