The investment decisions of a firm are generally 
  Long term     known as capital budgeting or capital expenditure 
  Investment    decisions.
  Decisions      Capital budgeting decision may be defined as the 
                firm’s decision to invest its funds in the long term 
  (Capital      assets in anticipation of an expected flow of 
                benefits over a number of years. 
  Budgeting      It involves a current outlay or series of outlays of 
  Decisions)    cash resources in return for an anticipated flow of 
                future benefits. 
     Features
       Exchange of current funds for future benefits
       Funds are invested in long term assets
       Future benefits will accrue over a series of years
       There is relatively high degree of risk
       There is relatively long period between the initial outlay and the anticipated return
      Importance of Capital budgeting Decisions
       Capital budgeting decisions are important because of the following reasons:
       They influence the growth of the firm
       Substantial Expenditures
       Long term periods: The effects of the decision will be felt over a long period of time. They have 
      long term consequences influencing the rate and growth of a firm.
       High Risk
       Irreversibility
       Complexity
      Types of Investment 
      Decisions
       Different ways to classify investment decisions. 
      ◦ Expansions
      ◦ Diversification
      ◦ Replacement and Modernization
      ◦ Research and Development
       Another Classification 
      ◦ Mutually exclusive investments
      ◦ Independent investments
      ◦ Contingent of Dependent investments
     Capital Budgeting Process
     Identification of investment proposals
     Screening the proposals
     Estimation of cash flows
     Evaluation of proposals
     Fixing priorities
     Final approval and preparation of capital expenditure budget
     Implementing proposal
     Performance review