What is the relevance of capital budgeting techniques in the mgt decision function?
Capital budgeting refers to the process we use to make decisions concerning investments in the long-term assets of the firm. The general idea is that the capital, or long-term funds, raised by the firms are used to invest in assets that will enable the firm to generate revenues several years into the future. Often the funds raised to invest in such assets are not unrestricted, or infinitely available; thus management must make a decision on how these funds are invested. Importance of Capital Budgeting—because capital budgeting decisions impact the firm for several years, they must be carefully planned. A bad decision can have a significant effect on the firm’s future operations. In addition, the timing of the decisions is important. Many capital budgeting projects take years to implement. If firms do not plan accordingly, they might find that the timing of the capital budgeting decision is too late, thus costly with respect to competition. Decisions that are made too early can also be
