Professional Documents
Culture Documents
Capital Budgeting
Capital budgeting involves planning and justifying large expenditures on long-term projects
Projects can be classified as:
Replacement Expansion New venture
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Importance of c.b d
Growth Risk Funding Irreversibility Complexity
Payback
How many years to recover initial cost
Profitability Index
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NPV and IRR do not always select the same project in mutually exclusive decisions
A conflict can arise if NPV profiles cross in the first quadrant In the event of a conflict The selection of the NPV method is preferred
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