Capital budgeting is the process of planning long-term investments for projects that have a life of at least one year. There are formal methods for capital budgeting like net present value, internal rate of return, and profitability index. Riordan Manufacturing produces plastic products and is considering relocating its China operations to Shanghai which could result in significant cost savings and better positioning in Asian and European markets. Relocating would require investing in property in Shanghai, building a new plant, and buying new equipment, but both plants could be maintained to increase production.