Abstract
The basic purpose of capital budgeting is to regulate the flow of funds in an organization in such a way that the objectives of the enterprise are fulfilled regardless of size. The regulating of the flow of funds includes both the determination of the source and use of the funds. Capital budgeting from a narrow point of view may be described as the “process of planning the long term movement of funds which involve decisions for outlays on plant, equipment, new product lines, major changes in markets, and other similar long-range fund commitments". Capital budgeting for the purposes of this paper will be considered from the narrow view.