WS 6.3 _ Capital Budgeting _ Discussion.docx - Workshop 6.3...

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Workshop 6.3 Discussion 1 Capital Budgeting Application: How could capital budgeting be applied in your organization or to your personal finances? Capital budgeting, as defined by Ross, Westerfield, and Jordan (2016), is the process in which a business determines and evaluates potential expenses or investments that are large in nature. Businesses (aside from non-profits) exist to earn a profit (Gad, 2012). Capital budgeting is important because it creates accountability. Essentially, a capital budget decision involves two important decisions at once: financial decision and investment. Having an understanding of the process of a capital budget can be applied to one’s everyday life. One of the hardest parts of controlling your finances is having to look at every separate account and whether if you are staying within your budget. Developing a capital budget for one’s personal life can determine the payback period, AAR, IRR, PI, and NPV of multiple accounts. A person is able to examine how much they are spending each month and saving.

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