Capital budgeting is a multi-step process that is used to determine if a particular business project or plan is worth the investing. It is a long-term planning for financing of a proposed project such as purchase of a new machinery or equipment, investing in new products or projects, etc. Capital budgeting projects are categorized as follows:
- Replacement Projects for Maintaining Business - Projects for the maintenance and functioning of the existing business operations.
- Replacement Projects for Reducing Cost - Projects for replacing equipment, products, services, or functioning that may require lesser resources and funds.
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