ABSTRACT
There are many investment decisions that the company may have to make in order to grow. Examples of capital budgeting applications are product line selection, keep-or-sell a business segment decisions, lease or buy decisions, and determination of which assets to invest in. To make long-term investment decisions in accordance with your goal, you must perform three tasks in evaluating capital budgeting projects: (1) estimate cash flows; (2) estimate the cost of capital (or required rate of return); and (3) apply a decision rule to determine if a project is “good” or “bad.”
