If the capital budgeting proposal has a distinct level of risk, the corporate cost of capital may not be the appropriate discount rate.
Making a recommendation for investments is the first stage in capital budgeting. Investments in a firm may be made for a variety of reasons. It can involve adding a new product line or growing an already existing one. It could involve a suggestion to either boost output or lower the price of outputs. The techniques for carrying out capital budgeting are Payback Period, Net Present Value Method, Internal Rate of Return, and Profitability Index. Payback period, discounted payment period, net present value, profitability index, internal rate of return, and modified internal rate of return are the seven crucial capital budgeting methods or strategies.
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