Talk:Capital budgeting

Discussion
I have problem with actual practiced of capital budgeting. — Preceding unsigned comment added by 14.97.114.108 (talk) 12:10, 10 April 2013 (UTC)

I have a problem with Net Present Cost

The higher the discount rate the lower the cost

How can I reconcile this with the higher risk (Discount)leading to the lower NPC?

This rule forces the choice of the most risky project

Is this simply the maths being correct but the business decision being wrong?

Farquemoi (talk) 00:51, 24 March 2009 (UTC) Capital Budgeting

While describing IRR you say "Nevertheless, for mutually exclusive projects, the decision rule of taking the project with the highest IRR - which is often used - may select a project with a lower NPV". I dont understand how is this possible .Can you give some example?

'example with mutually exclusive projects, k=8%

time	0      	1       	 2      	 3	       4	       5

CFA	-2000  300    300	300	300	2300

CFB	-1000  200    200	200	200	1200

NPV A = $558.98, IRR = 25%

NPV B	= -1000 + 200{P/A 8%,5} + 1000{P/F 8%,5}

= $479.13 < $558.98. ==> accept project A but IRR B = 20% > 15% !

Why the difference in the 2 methods? Mainly the effect of the size of investment here. It can be better to invest 2000 at 15% than 1000 at 20%. What do you do with the extra 1000? That's the key hidden assumption of the 2 methods. If you invest it at 8% (implied by NPV's assumptions) then A is better. But if you invest it at 20% (implied by IRR's assumptions) then B is better. Most people think that an 8% re-investment rate is more realistic.

Smallbones 15:03, 27 February 2007 (UTC)

I think this should cover the payback method as well. The payback method may seem trivial, but for small projects, particularly IT projects, where the system developed may become obsolete within four years, it may be the most appropriate method.

Increase the clarity of the article and its assistance to users with real-world examples.
This article is well-written and has a very concise manner of explaining the various concepts discussed as they relate to Capital Budgeting. However, with concepts such as the ones discussed in this article, it would be useful for a user to be able to practice problems that are short and simple and able to demonstrate the various concepts. Perhaps one problem that is solved, per concept in the article, or maybe a robust practice problem that is solved, which can address multiple concepts discussed in this article.

Minmount (talk) 22:53, 4 February 2018 (UTC)

Observation The article has very few citations and there is little in-text citations as well as hyperlinks that were integrated into the article. Beski001 (talk) 22:00, 17 March 2018 (UTC)

Insufficient details on the main topic Capital budgeting
The explanation looks great. However, the main topic of the article "Capital Budgeting" has not been defined adequately. Most article focuses on describing the concept related to Capital budgeting. However, more details on the main section would be much more valuable. -Industryman (talk) 22:32, 30 January 2019 (UTC)

Article Evaluation
The content looks great, neutral and straight to the point. The nine techniques used in capital budgeting appears relevant and all refer to the main topic in their respective articles. However, some claims (for example, in the “Internal Rate of return” section) need reference. Ian0217 (talk) 02:19, 31 January 2019 (UTC)

From what I have read, whatever is said seems related to the topic based on my understanding. Sometimes, I do feel a little bit distracted because I think the information that they are trying to present us does not go with what the article is all about. For example, when they were talkin about the internal rate of return, they mentioned many shortcuts of names like IRR, NPV...This was a little bit confusing because I had to go back to the correct correlation and see what it means Sidinho26 (talk) 20:56, 31 January 2019 (UTC)Sidinho26Sidinho26 (talk) 20:56, 31 January 2019 (UTC)