Capital Budgeting - CapitalBudgeting &selectinglong

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Capital Budgeting Capital Budgeting is employed to evaluate expenditure  decisions which involve current outlays but are likely to  produce benefits over a period of time longer than one year. term investments that are consistent with the firm's goal of  owner wealth maximization.  
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# Expenditure :  Capital Expenditure   : An outlay of funds by the firm that is  expected to produce benefits over a period of time greater than  one year. Current Expenditure  : An outlay of funds by the firm resulting in  benefits received within one year.   # Key Motives for Making Capital Expenditure  1. Expansion 2. Replacement 3. Renewal             4.Other purposes
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# Steps in Capital Budgeting Process 1. Proposal generation 3. Decision making 4. Implementation 5. Follow-up   # Independent Projects  : Projects whose cash flows are  unrelated or independent of one another ; the acceptance of  one does not eliminates the others from future consideration.
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# Mutually Exclusive Projects : Projects that compete with one another, so that acceptance of one eliminates the others from further consideration. # Unlimited Funds : The financial situation in which a firm is able to accept all independent projects that provide an acceptable return. # Capital Rationing :The financial situation in which a firm has only a fixed number of dollars to allocate among competing capital expenditure.
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RANKING APPROACH  : The ranking of capital expenditure  projects on the basis of some   predetermined  measures such  as the rate of return 
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This note was uploaded on 03/24/2012 for the course BBA SBM taught by Professor Goa during the Spring '09 term at East West University, Chicago.

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Capital Budgeting - CapitalBudgeting &selectinglong

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