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Types of Capital Budgeting Decisions (in Hindi)
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Heena Malhotra
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U
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Thankful to you for making such a wonderful lessons.
mam ap youtube pe hai ??
Heena Malhotra
a year ago
nhi isha :)
  1. Capital Budgeting Decisions By Heena Malhotra


  2. Replacement and Modernisation decisions On the basis of firm's existence Expansion decisions Diversification decisions Mutually exclusive decisions On the basis of decision situation Accept-Reject decisions Contingent decisions By Heena Malhotra


  3. On the basis of firm's existence The capital budgeting decisions are taken by both newly incorporated firms as well as by existing firms. The new firms may be required to take decision in respect of selection of a plant to be installed. The existing firm may be required to take decisions to meet the requirement of new environment or to face the challenges of competition. These decisions may be classified as follows: () Replacement and Modernisation decisions: The replacement and modernisation decisions aim at to improve operating efficiency and to reduce cost. Generally, all types of plant and machinery require replacement either because of the economic life of the plant or machinery is over or because it has become technologically outdated. The former decision is known as replacement decisions and latter is known as modernisation decisions. Both replacement and modernisation decisions are called cost reduction decisions. By Heena Malhotra


  4. On the basis of firm's existence () Expansion decisions: Existing successful firms may experience growth in demand of their product line.If such fims experience shortage or delay in the delivery of their products due to inadequate production facilities, they may consider proposal to add capacity to existing product line. i)Diversification decisions: These decisions require evaluation of proposals to diversify into new product lines,new markets etc. for reducing the risk of failure by dealing in different products or by operating in several markets. Both expansion and diversification decisions are called revenue expansion decisions. By Heena Malhotra


  5. Replacement and Modernisation decisions On the basis of firm's existence Expansion decisions Diversification decisions Mutually exclusive decisions On the basis of decision situation Accept-Reject decisions Contingent decisions By Heena Malhotra


  6. () Mutually exclusive decisions : The decisions are said to be mutually exclusive if two or more alternative proposals are such that the acceptance of one proposal will exclude the acceptance of the other alternative proposals. For instance, a firm may be considering proposal to install a semi-automatic or highly automatic machine. If the firm installs a semi-automatic machine it excludes the acceptance of proposal to install highly automatic machine. (i) Accept-reject decisions: The accept-reject decisions occur when proposals are independent and do not compete with each other. The firm may accept or reject a proposal on the basis of a minimum return on the required investment. All those proposals which give a higher return than certain desired rate of return are accepted and the rest are rejected. By Heena Malhotra


  7. On the basis of decision situation (ii) Contingent decisions : The contingent decisions are dependable proposals. The investment in one proposal requires investment in one or more other proposals. For example, if a company accepts a proposal to set up a factory in remote area it may have to invest in infrastructure also e.g. building of roads, houses for employees etc. By Heena Malhotra


  8. Replacement and Modernisation decisions On the basis of firm's existence Expansion decisions Diversification decisions Mutually exclusive decisions On the basis of decision situation Accept-Reject decisions Contingent decisions By Heena Malhotra