What factors do you need to consider for a capital budgeting project?
Why is it so difficult to forecast the rate of return of a given project?© BrainMass Inc. brainmass.com November 30, 2021, 1:34 am ad1c9bdddf
The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm's investment decisions would generally include expansion, acquisition, modernization and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision. Decisions like the change in the methods of sales distribution, or an advertisement campaign or research and development programs have long-term implications for the firm's expenditures and benefits, and therefore, they should also be evaluated as investment decisions. Thus capital budgeting has following characteristics:
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