Capital budgeting also referred to as Investment Appraisal can be defined as a step by step process that businesses use to determine the merits of an investment project. Capital budgeting helps a business to see into the future and figure out the profitability of a long-term investment. The decision to whether accept or reject an investment project involves determining the investment rate of return that such a project will generate. However, what rate of return is deemed acceptable or unacceptable is influenced by other factors as well that are specific to the company as well as the project (Thompson,2018).
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