Capital Budgeting includes calculation of the future accounting profit of a project, the cash flow and its present value, and the number of years it involves for the cash flow of a project to pay back the primary cash investment, risk assessment, and other factors. Our tutors are highly qualified and have many years of experience to provide online homework help on Capital Budgeting topic.
The Objectives of Capital Budgeting
Capital expenditures are a long-term impact and are huge. So, for capital budgeting, an organization has the consider the following objectives that are discussed in our Capital Budgeting assignment homework Help as follows:
- Choosing profitable projects: An organization deals with many profitable projects. However, because of capital restrictions, you need to choose profitable projects, which will enhance the wealth of shareholders.
- Capital expenditure control: Selecting a profitable investment is an important objective of capital budgeting though keeping capital costs in control is an important objective too. Forecasting the requirements of capital expenditure and budgeting for them and ensuring that investment opportunities are not lost is the objective of budgeting.
- Finding the right fund source: Determining the funds needed and the sources to procure them is an important objective. Finding the right balance between returns on investment and the borrowing cost is an important objective of Capital Budgeting.
Capital Budgeting Techniques
To help an organization select the best investment, you will find many available techniques based on cash inflows and cash outflows. The techniques are explained when you ask, "who can write my homework for me on Capital Budgeting" as follows:
- Payback period method: In this method, the time period needed to earn the primary investment of an investment or a project is calculated. The investment or project having the shortest duration is chosen.
- Net Present value: The Net Present Value or the NPV is calculated by taking the differences between the present value of cash flows and the present value of cash outflows over a period of time. The investments having a positive NPV are considered.
- Accounting Rate of Return: In the method, the net total income of an investment is divided by the average or initial investment to reach the most profitable project.
- IRR or the Internal Rate of Return: For NPV calculation, you use a discount rate. It is the rate where the NPV is zero. A project having a higher IRR is selected.
- Profitability index: It is a ratio of the initial investment to the present value of cash flows made in the future for a project.
Every technique has its own merits and demerits. An organization should use the best technique in capital budgeting. An organization can choose various techniques and then compare its results to reach out to the most profitable project.