Question

What are the important administrative considerations in the capital budgeting process?

Short answer

Important consideration includes the find investment opportunity and data of that investment. It also includes evaluation and revaluation of the investment.

Step-by-step solution

Definition of Internal Rate of Return

Internal rate of return is the rate which help the company to determine the profitability of the initial investment made by the business entity. It is calculated using the same formula as NPV is calculated.

Important consideration of capital budgeting process

Capital budgeting process performed by the investors or company have following considerations:

(a) Firstly, company find out the suitable or required investment opportunities in the market.

(b) Company has to collect the data of the all-investment opportunities available in the market.

(c) Then company evaluate the all the investment opportunities by using the capital budgeting techniques. After the evaluation company select the most suitable investment opportunity.

(d) After the selection, company revaluate the investment and analyse that whether investment are useful as per their expectation or not.