The capital budgeting decision refers to the investment in a fixed asset whose returns are expected over a long period of time. ‘It is the process of identifying, analysing and selecting investment projects whose returns (cash flows) are expected to extend beyond one year’. The capital investment decisions are classified as replacement decision, expansion/modernisation decision, and diversification decision. The capital budgeting decision basically is grouped into allocation of long-term funds into fixed assets, risk analysis of capital investment decisions, and measurement of the cost of capital. The capital budgeting process consists of identifying investment needs, project feasibility study, and capital project evaluation. The capital investment projects are categorised as independent projects, dependent projects or contingent projects, and mutually exclusive projects.