Capital budgeting, and investment appraisal, in corporate finance, is the planning process used to determine whether an organization's long-term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures. One of the primary goals of capital budgeting investments is to increase the value of the firm to the shareholders. Many formal methods are used in capital budgeting, including the techniques such as accounting rate of return Average Profitability index Internal rate of return Modified internal rate of return Equivalent annual cost.

Rohit Senan C

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