It is the process of acquiring a capital project or fixed assets. It includes the identification of investment opportunities, estimation of relevant cost and benefit of the project, evaluation of the project, approval, and monitoring of the project.

Techniques of Capital budgeting:

Traditional Method or Non-discounted cash flow method
Modern Method or Discounted cash flow method

Traditional method: PBP method, Average rate of return (ARR)
Modern method: Discounted PBP, Net Present Value (NPV), Internal rate of return (IRR), Profitability Index (PI)

Concept of Capital Budgeting

Filter Course

Unit I: Financial Management and Its Environment

Unit II: Financial Statements and Analysis

Unit III: Time Value of Money

Unit IV: Raising Capital

Unit V: Cost of Capital

Unit VI: Capital Budgeting

Unit VII: Capital Structure

Unit VIII: Dividend Decision

Unit IX: Working Capital Management

Question Bank

Concept of Capital Budgeting