Explain capital budgeting and briefly discuss each of the five stages of a capital budgeting project.
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Question

Quizplus · Accepted Answer

The Answer is Capital budgeting is long-run planning for investment projects that usually have a life that is greater than one year.
Stage 1 of a capital budgeting project is the identify projects stage in which a firm determines which types of capital investments are necessary to accomplish organisation objectives and strategies.
Stage 2 is the obtain information stage in which a firm gathers information from all parts of the value chain to analyse alternative projects.
Stage 3 is the make predictions stage in which the firm forecasts all potential cash flows attributable to the alternative projects.
Stage 4 is the make decisions by choosing among alternatives stage in which the firm determines which investment yields the greatest benefit and the least cost to the organisation.
Stage 5 is the implement the decision,evaluate performance,and learn stage that is further separated into two sub stages:(1)obtain funding and make the investments selected in the stage 4 process,and (2)track the realised cash flows,compare against the forecast numbers and revise plans if necessary.

Explain Capital Budgeting and Briefly Discuss Each of the Five