Prepared ByRAJESH GANDHAM (PR)

CAPITAL BUDGETINGIN

Sri Tulasi Rama Chandra Prabhu

CHAIRMAN

Sri. Tulasi Krishna Chaitanya

DIRECTOR

Tulasi seeds pvt ltd Tulasi digital studios Tulasi filling system Tulasi technosoft pvt ltd Tulasi township pvt ltd Tulasiram chits pvt ltd Chandra transports Chaitanya packaging pvt ltd Coastal packaging’s Diehard dies pvt ltd Impec Soft solutions pvt ltd

COTTON SEEDS

VEGETABLE SEEDS

CAPITAL BUDGETING

Feedback

Performance Review

Implementing Proposals

Final Approval

Fixing Priorities

Evaluation of Various Proposals

Screening Proposals

Identification of Investment Proposals

CAPITAL BUDGETING PROCESS

Capital Budgeting Methods

Traditional Methods

Payback Period

Accounting Rate of Return

Modern Methods

Net Present Value

Profitability Index

Internal Rate of Return

CAPITAL BUDGETING METHODS

CALCULATION OF PAYBACK PERIODA. IN THE CASE OF EVEN CASH FLOWS:

Initial Investment Payback Period = ------------------------------- Annual Cash Inflows

B. IN THE CASE OF UNEVEN CASH INFLOWS

Required Cash Inflow After TaxPayback Period = Base Year + ------------------------------------------ Next Year Cash Inflow After Tax

PAYBACK PERIODMERITS: Easy to calculate. Simple to understand. Less time.

DEMERITS: It stresses on capital recovery rather than profitability. It does not consider the return from the project after its payback period.

CALCULATION OF ACCOUNTINGRATE OF RETURN

Average Net IncomeARR = ----------------------------------- × 100 Average Investment

Total Cash InflowsAverage Net Income = ------------------------------- No. of Years

Total InvestmentAverage Investment = ------------------------------ 2

CALCULATION OF NET PRESENT VALUE

SPresent Value = ------------- (1+i)n

Net Present Value = Present Value of Cash Inflows - Initial Cash Outlay

CALCULATION OF PROFITABILITYINDEX

Present Value Cash InflowsProfitability Index = -------------------------------------- Initial Cash Outlay

P1-C0

IRR = L + ------------- P1-P2

CALCULATION OF INTERNAL RATEOF RETURN

DECISION CRITERIA

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