Write an essay outlining the impact of Capital Budgeting decisions on shareholders wealth maximization as well as the qualitative factors that affect Capital Budgeting process and decision.
Impact of Capital Budget and Qualitative Factors of Capital Budget on Shareholders Wealth
Impact of Capital Budgeting Decisions on Shareholders’ Wealth Maximization
Capital budgeting also known as investment appraisal is a decision-making and a design analysis tool that a company management applies to evaluate investments consistent so as to maximize the wealth of the shareholders. Some of the reasons why capital budget is used when a company wants to achieve some of the goals; expansion by acquisition of fixed assets and infrastructure like real estates, also when they want to make replacements like obsolete assets, update software, do preventing maintenance. Another reason for capital budgeting in modernization, this could be reconditioning, reconstruction and adaptation of new assets, capital budgeting is also used to meet other purposes like advertising, consulting services and new products among other things. Notably, capital budgeting is designed to make sure the company remains competitive and viable, therefore, there has been great impacts that it has had on the shareholders wealth maximization.
Several reasons for capital budgeting have been embraced thus, has brought great impacts on the company. For instance, companies have been able to measure how it’s economic and financial profitability on a project will be projected. This is because before a company gets to capital budgeting they carry survey and research on the p…
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