Question

Can we apply capital budgeting techniques within the public sector? Explain in details using current event examples.

Answer 1

Capital budgeting is a formal process used for evaluating potential expenditures ot investments that are significant in amount.It involves the decision to invest the current funds for addition,disposition,modification or replacements of fixed assets.

Since,both public sector and private sector need to evaluate the investment decision.Hence capital budgeting techniques are also relevant for public sector.For example,Among the corporations that use capital budgeting methods,both in the public and private sector,the payback method is the most widely used method,followed by the Internal rate of return(IRR) and Net Present Value in the private sector and the public sector respetively.