Different stages of capital budgeting

Answer 1

According to Cost Accounting - A Managerial Emphasis, Fourth Canadian Edition (Horngren et al): 1: Identification - Identify which types of capital expenditure projects are necessary to achieve the organization's goals, objectives, and strategies. 2: Search - Explore several different capital expenditure investment alternatives that have the capacity to achieve the organizational objectives and strategies. 3: Information-acquisition - Analyze the predicted costs and consequences of the alternative capital investments. Information should be both qualitative and quantitative. 4: Selection - Choose projects for implementation. If there are several suitable projects, this could require ranking projects in terms of priorities. A single project hurdle rate is chosen and used to discount the costs and benefits of the various projects, thereby allowing management to compare the projects. 5: Financing - Obtain project finances. Determine whether internal financing (cash flow from operations) or external financing (debt or equity) is necessary. In large organizations, this is the responsibility of the treasury department. 6: Implementation and control - Initiate selected projects and monitor performance. This should include making sure the project is on time and within budget, and should be followed up by a post-investment audit.