ECONOMICS

Detailed explanation-1: -Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected.

Detailed explanation-2: -The process of planning and managing a firm’s long-term investments is called capital budgeting. In capital budgeting the financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire.

Detailed explanation-3: -The process of capital budgeting involves the steps like Identifying the potential projects, evaluating them, selecting and implementing the projects, and finally reviewing the performance for future considerations.

Detailed explanation-4: -Capital Budgeting is the process of determining the firm’s long term investments if they are profitable or not. Capital Budgeting is a process of evaluating the proposed major projects or investments if these assets will be able to have the required rate of return for the company.

Detailed explanation-5: -Capital budgeting is the process by which investors determine the value of a potential investment project. The three most common approaches to project selection are payback period (PB), internal rate of return (IRR), and net present value (NPV).