Question:

$($a$)$Discuss the needs and importance of capital budgeting

$($b$)$ Below you have given the information for project A and B.

Project A

Cash out flow   shs $100,000$

Annual cash inflow $($After tax before depreciation)  shs $\mathrm{25,0}00$

Estimate Life $\mathrm{ \; 6}$ years 

Project B

Cash out flow shs $100,00\mathrm{0 }$

Annual cash inflow $($After tax but before depreciation$)$ shs $20\mathrm{.}000$

Estimated life$\mathrm{ 1}0$ Years 

Required From the above particulars compute Payback period. On basis payback period comment which project should be accepted

$($c$)$ Identify advantages and limitations of Payback period as a method capital budgeting appraisal 

Answer rating: 100% (QA)

a Needs and Importance of Capital Budgeting Capital budgeting is the process of evaluating and selecting longterm investment projects that involve significant cash outflows and inflows It is crucial f... View the full answer