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ทุกบริษัทมีทุนจำนวนจำกัดและต่างก็ต้องการที่จะปรับใช้ทุนนั้นในวิธีที่มีประสิทธิภาพสูงสุดCapital budgeting is an important tool for leaders of a company when evaluating multiple opportunities for investment of the firm’s capital. Every company has both a limited amount of capital available and a desire to deploy that capital in the most effective way possible. When a company is looking at, for example, acquisitions of other companies, development of new lines of business or major purchases of plants or equipment, capital budgeting is the method used to determine whether one option is better than another. There are several capital budgeting methods, each with its pros and cons.Capital Budgeting by Payback PeriodThe most-used method of capital budgeting is determining the payback period. The company establishes an acceptable amount of time in which a successful investment can repay the cost of capital to make it. Investment alternatives with too long a payback period are rejected. Investment alternatives inside the payback period are evaluated on the basis of the fastest payback.Payback method disadvantages include that it does not account for the time value of money.Net Present Value Capital BudgetingIn net present value capital budgeting, each of the competing alternatives for a firm’s capital is assigned a discount rate to help determine the value today of expected future returns. Stated another way, by determining the weighted average cost of capital over time, also called the discount rate, a company can estimate the value today of the expected cash flow from an investment of capital today. By comparing this net present value of two or more possible uses of capital, the opportunity with the highest net present value is the better alternative.
A disadvantage of the net present value method is the method's dependence on correctly determining the discount rate. That calculation is subject to many variables that must be estimated.
The Internal Rate of Return Method
An advantage of capital budgeting with the internal rate of return method is that the initial calculations are easier to perform and understand for company executives who may not have a financial background. Excel has an IRR calculation function.
The disadvantage of the IRR method is that it can yield abnormally high rates of return by overestimating the value of reinvesting cash flow over time.
Read more: http://www.finweb.com/financial-planning/advantages-and-disadvantages-of-capital-budgeting.html#ixzz3cvQGfHK5
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