Capital budgeting is the planning process used to determine if long-term investments or capital expenditures are worth pursuing. It involves analyzing potential capital projects to see if they will provide returns that exceed their costs. There are three main types of capital budgeting decisions: accept/reject decisions that determine if a project's returns are higher than costs; mutually exclusive decisions where only one of several competing projects can be chosen; and capital rationing decisions that rank projects when funds are limited and the most profitable must be selected.

1. Capital budgeting decisions
SAFNA EM

2. Capital budgeting, which is also called investment
appraisal, is the planning process used to determine
whether an organization's long term investments,
major capital, or expenditures are worth pursuing.
capital budgeting decision is concerned with the
long-term investment decision i.e. making capital
expenditure. The expenditure on fixed asset such as
land and building, furniture and fixtures, plant and
machinery etc. is called capital expenditure.

3. 1.) Accept reject decisions: all the
investment decisions which give more
return than the cost of capital they are
acceptable while the investment
decisions which give less return than the
cost of capital they are rejected. Thus
firm will make investment only if the
decision is acceptable.
3 TYPES OF CAPITAL BUDGETING

4. 2) Mutually exclusive decisions: these
are the decisions which compete with
each other which mean the
acceptance of one automatically
rejects the other decision. The firm
has various alternatives; once one
alternative is selected the other
alternatives are automatically rejected

5. 3) Capital rationing or ranking decisions: in case
the firm has various profitable investment
proposals in that case the firm had only option to
rank them as per their profitability and then
accept them.

6. TYPES OF CAPITAL BUDGETING
DECISIONS
• Expansion of facilities
• New or improved products
• Replacement
• Make or buy
• Lease or buy
• Environmental protection equipment

7. Examples of capital budgeting
decisions
• Decision related to setting up of factories
• Decision related to installing a machinery
• Decision relating to creating additional
capacity to manufacture a part which at
present is purchased from outside