# Essay on Capital Budgeting

Capital budgeting is a process where business executives plan about the future of their company. The company looks at potential investments, and they must decide if the investment is worth being funded by the company’s current capital. The process involves decisions that will affect the company’s long-term business structure. In our capital budget case we had to choose between two corporations that are available for sale. As executives, we must look at the most logical corporation to invest in. We have calculated the projected income statement and projected cash flow for the next five years. After evaluating that information we were able to view the net present value and internal rate of return. Based off the findings of

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In the cases of Corporation A and Corporation B the best option concerning acquiring another corporation would be Corporation B. First there is a difference in the NPV whereas Corporation A is 20,979.20 at 10% and Corporation B is 40,251.47 at 11% based on the net present value. According to this analysis the NPV for Corporation B is greater than Corporation A which addresses the present money of today to the present value of money of the future. If the net present value of any project or investment is positive then only that investment is accepted otherwise it should be rejected, as the NPV is negative. If the NPV is zero then it is projected that it is positive. The NPV is the best technique available these days and is reliable concerning more accurate results. If the discount rate does