| The Capital Budgeting decisions generally
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| | destiny of a firm.Capital expenditure
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| involve very large amount of capital
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| | decisions are irreversible in nature.
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| funds. However, the availability of such
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| | Once the decision to commit long-term
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| funds is very limited. It is therefore,
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| | funds is made, especially on the
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| essential that thoughtful and wise
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| | acquisition of assets, it would prove
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| decisions are made concerning such
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| | suicidal to go back on such a decision.
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| investment of capital funds. This alone
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| | This is because such assets, once
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| would result in flow of profits for the
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| | required, could not be disposed off
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| firm.Capital Budgeting involves the
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| | without incurring huge losses. Hence,
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| employment of capital funds in the
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| | capital expenditure decisions are
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| activities of the firm on a long-term
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| | considered significant.Capital
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| basis. This increases the financial risk
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| | expenditure decisions have a long-term
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| involved in such investment decisions.
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| | and significant impact on the
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| This necessitates the careful and
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| | profit-earning capacity of a firm. This
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| efficient planning of capital
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| | is because, as funds are committed in
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| expenditure. This is because any wrong
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| | assets, they not only improve the current
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| and unwise decision may prove disastrous
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| | earnings, but also significantly
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| for the firm.Such a decision leads to
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| | contribute to the overall and long-term
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| unwanted expansion of assets, which may
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| | profitability of the firm. Any unwise and
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| result in heavy operating costs to the
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| | thoughtless decision may prove to be
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| firm. On the other hand, inadequate and
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| | fatal to the very existence and survival
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| untimely decisions may plunge the company
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| | of the firm. Hence, Capital Budgeting
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| into a financial morass. This may weaken
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| | decisions are of vital importance. Such
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| the competitive strength of the firm.
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| | decisions could guard against both over-
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| Thus, it is clear from the above that
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| | investment and under- investment in fixed
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| capital decisions determine the future
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| | assets.
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