For businesses to continuously sustain in the competitive market, they need to expand their operations to relevant new dimensions. For this, they have to go for expansion, replacement and renewal of their capital assets. With regards to these situations, organizations need to deploy long term capital, and they have to decide in which of the alternatives they should fund. This scenario initiates the concept of capital budgeting. Required (a) Outline three (3) advantages and three (3) disadvantages of capital budgeting. (b) There are a number of capital budgeting techniques available. List four of the methods used.
For businesses to continuously sustain in the competitive market, they need to expand their operations to relevant new dimensions. For this, they have to go for expansion, replacement and renewal of their capital assets. With regards to these situations, organizations need to deploy long
term capital, and they have to decide in which of the alternatives they should fund. This scenario initiates the concept of capital budgeting.
Required
(a) Outline three (3) advantages and three (3) disadvantages of capital budgeting.
(b) There are a number of capital budgeting techniques available. List four of the methods used.
Capital budgeting concept is used to evaluate the projects and opportunities that the company have to make the decision.
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