Capital budgeting is a process of checking, analysing, and ranking the assets to be purchased according to which decisions will be made as to which asset will provide the company with the most return. It is one of the most important tools in finance, it helps the business to ascertain the risk and uncertainty involved in the different business transaction.
A student studying finance is required to master this subject. The assignments involved with this subject can be of obtuse nature because of the calculations involved. If a student is having trouble with his or her assignment, they can seek the assistance of our capital budgeting assignment help.
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As mentioned above, capital budgeting is the process of choosing the right asset for the company. The company works to increase the amount of profit it earns. This requires the company to buy new assets in every five years. These assets may be a machine that would produce products, a piece of land that would be used to build a storehouse or a factory or any such asset that the company plans to use to increase its productivity or its profit.
Choosing the right asset is a big decision, as it depletes a big amount of the monetary resource of the company. Further, these assets are analysed to see which would bring the most monetary benefit to the company and which would last the longest before it becomes a liability. The purchase price and the depreciation are subtracted from the total cash flow the asset would generate in its lifetime. There are three most used methods to analyse:
Payback Period - These are the number of years in which the company expects to recover the amount it has invested. This is the basic and the most used method. When a company invests in some capital asset, it invests for the purpose of earning a profit. But this profit would be earned once the amount invested in it is recovered. For example- If a company invests in a machine which costs 90,000 and the cash flow from it is 30,000 per year, it would take three years for the company to recover its investment. And if the investment is for 1,10,000, then it would take between three to four years for the company to recover the amount invested. Once, the company has recovered the amount invested, whatever other cash flow the machine generates is considered as profit. This method has two further parts.
The rate of Return - This method is another common method to analyse the investment. This method is known and used in a few different ways, i.e. accounting RoR, internal RoR, and average RoR. Even though it is used in different ways, but the method is still similar to the original. This method analyses the price of the investment and the profit after tax it will deliver. The investment cost is divided by the profit it will generate in its lifetime. If the actual return is more than the expected return, then the investment is considered to be a good investment. If the actual investment is less than the expected investment, then it is considered as a bad investment, and the company would search for another investment. There are a few limitations to it. It doesn't consider years, it is used for. It spreads the profit equally over all the year instead of how it is actually generated.
There are several problems faced by students who take on capital budgeting assignments. The primary and the most bothering of all the problems would be the nature of the subject; which is convoluted in its comprehension and very prone to errors if the problem is not taken care of impeccably. There are several theoretical concepts that can also pose many problems for the students. The assignments assigned to the student can also be problematic due to the lack of familiarity with the concept and the skill to carry out the task effectively.
The theoretical part can also pose problems because of the minimum word requirement which would demand a considerable time on the part of the student. But the students need not worry any longer as we at EssayCorp provide the best capital budgeting assignment help. We have a large team of adept writers who are PhD's and subject matter experts; they can deliver the best assignment at the stipulated time. Our team of writers are established all around the world which gives us the capability to deliver the most relevant content with a 24/7 assistance time and time again.
Following are the brief descriptions of the methods of capital budgeting we cover in our capital budgeting assignment help.
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