Capital budgeting is the process of evaluating and selecting long-term investment projects. It involves identifying potential projects, estimating cash flows, determining project costs and the cost of capital, and evaluating projects using financial metrics like Net Present Value (NPV) and Internal Rate of Return (IRR). These decisions are critical as they impact a company's financial health and future growth. The goal is to allocate resources wisely to projects that promise returns exceeding their costs, contributing to overall shareholder value.
How to Calculate it?
