Capital budgets forecast and spending for capital expenditures (CAPEX), the acquisition of capital assets usually long lasting, expensive acquisitions that goes onto the company's balance sheet as assets. On the company's income statement, capital assets contribute to depreciation expense throughout their depreciable lives.
While deciding which capital investments to make, companies usually use a combination of formal financial criteria,as below
- NPV=Net present value
- IRR = Internal rate of return
- ROI = Return on Investment
- Payback period
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