CHAPTER 10 The Basics of Capital Budgeting Should we build this plant? What is capital budgeting? Analysis of potential additions to fixed assets. Long-term decisions; involve large expenditures. Very important to firm’s future. | CHAPTER 10 The Basics of Capital Budgeting 10-1 What is capital budgeting Analysis of potential additions to fixed assets. Long-term decisions involve large expenditures. Very important to firm s future. 10-2 Steps to capital budgeting 1. Estimate CFs inflows outflows . 2. Assess riskiness of CFs. 3. Determine the appropriate cost of capital. 4. Find NPV and or IRR. 5. Accept if NPV 0 and or IRR WACC. .
