Rationale

The rationale underlying me capital budgeting decision is efficiency. Thus a firm must replace worn and obsolete plants and machinery acquire fixed assets for current and new products and make strategic investment decisions. This will enable the firm to achieve its objective of maxing profits either by way of increased revenues or cost reductions. The quality of these decisions is improved hey capital budgeting. Capital budgeting decision can be of two types. (j) those which expand revenues, and (ii) those which reduce costs

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