Question

what is the meaning of Capital budgeting tools?

i need clear information please

Answer 1

Capital capital budgeting tools like the payback period, discounted payback period, net present value, internal rate of return, profitability index, tells an organisation whether investment in a certain project is to be made or not, whether that project will yield profit or not, how much time will it take to recover the cost involved in the project and when will it start yielding profit.

It is the technique which company uses to evaluate it's investment decision, which can be purchasing any plant, equipment, etc., so that the company could analyse which project will yield best return in lesser time.