Capital expenditure generally brings in changes in the cost pattern of a product or service. If the capital expenditure is to replace an asset with…

Cash receipts and cash disbursements are referred to as cash flows. The cash receipts are cash inflows and the cash disbursements are cash outflows. Capital…

A series of activities takes place before a fixed asset is acquired and brought to a state ready for use. For example, one might think…

The total cash inflows over the life of the project should exceed all of the cash outflows. The cash flows take place over a specific…

There are a number of capital budgeting models available that assess and rank capital expenditure proposals. Let’s take a look at four of the most…

Capital expenditure relates to an investment project for long-lived assets. The appropriate capital expenditure on a project should include all costs, such as planning fees,…

Once we have identified the need for capital expenditure, various project options have to be examined and evaluated to select the most cost-effective one. This…

This method of evaluating business investments considers the profitability of a project based on accrual accounting amounts found in the financial statements. The drawback of…

The payback method is the simplest way of looking at one or more major project ideas. It tells you how long it will take to…

The net present value method (NPV) of evaluating a major project allows you to consider the time value of money. Essentially, it helps you find…