Capital Budgeting Process

Capital budgeting process

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1) Capital budgeting...............................................................................................................3
2. Background of the case study.............................................................................................3
3. Capital Budgeting Process..................................................................................................4
4. What other factors were considered besides Capital financing and allocation functions
during Capital Budgeting Process? Was there any managerial considerations and
complications?........................................................................................................................5
5. Critical review and evaluation............................................................................................6
CONLCUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Capital budgeting is the method that an organization obtains to determine future new
projects and investments(Abor, 2017). Types of ventures that will include capital budgeting
before they could be accepted or refused include the building of a new factory or a massive
investment in an outside company. The method is also known as evaluation of assets.
In this report, Employing Capital Budgeting and Creative Thinking, factors were considered
besides Capital financing and allocation functions during Capital Budgeting Process are
discussed.
MAIN BODY
1) Capital budgeting
A basic concept of finance philosophy is that executives function to optimize shareholder
interest. It has been translated in the sense of capital budgeting to indicate that management
should pick all projects which support the business strategy. To do so, administrators will set the
average valuation of all people involved in a project, and pick those that generate the business's
most valuation. Such three groups were thought to have identified the key strategic choices. The
inland core would have been closer to the current market (mainly Gauteng) which would be
safer, since local markets in the short to medium to long term remain dominant. A coastal
position will be advantageous in terms of rising export sector shipping costs-the strategic long-
term target. Finally, an international position was considered to be far more appealing in terms of
pursuing the long-term policy of increased export promotion. It was made the decision across the
assessment exercise that should be retained as a benchmark case. Throughout this stage the
impact of the two external objectives is clearly evident.
2. Background of the case study
This paper fosters an appreciation of capital budgeting by analysing two specific
expenditure decisions made by South African manufacturing companies. This research suggests
that managers will not focus their capital allocation choices as suggested by the principle on a
calculation of the estimated valuation of future investment prospects. Rather they adopt a multi-
stage screening mechanism and that the project list by qualitatively ensuring consistency with the
company's strategic objectives (BiermanJr and Smidt, 2012). Throughout the case of Maruitius
overcrowding benefit upon the local place, in the relation of expense and the anticipated profit