60 Important Capital Budgeting Questions and Answers [With PDF]
The 6th chapter of our finance learning course is “ Capital Budgeting .” In this article, we’ll learn the 60 most important capital budgeting questions and their answers.
By reading this post, you may quickly prepare for “finance” courses and for any competitive tests such as school and college exams, vivas, job interviews, and so on.
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Capital Budgeting Questions and Answers
Question 01: What is capital budgeting?
Question 02: What is another name for capital budgeting?
Question 04: What are the types of projects?
Question 06: What are the fundamental principles of capital budgeting?
Question 08: What are the benefits or importance of capital budgeting?
Question 10: What are the constraints or limitations of capital budgeting?
Question 12: What are the factors affecting capital budgeting decisions?
Answer: The amount of money paid out or received at the start of a project or investment is referred to as the “initial cash outflow.”
Answer: Interim incremental net cash flows are the extra operating cash flows that a company gets because it started a new project.
Answer: The terminal year incremental net cash flow is calculated as follows:
Answer: This is an important decision in capital budgeting. The farm would invest in the project if it were accepted, but not if it were rejected.
Question 22: What is a capital rationing decision?
Answer: Using different capital budgeting techniques, this method starts by figuring out how likely each project is to happen.
Answer: The discounted methods of capital budgeting are as follows:
Answer: When you divide the average annual net income after taxes by the average investment, you get the average rate of return. It considers both the amount invested and the profit generated.
Question 29: What is an internal rate of return (IRR)?
Question 31: What are the techniques or methods of capital budgeting?
R = Required rate of return for the investment
ABC Corporation is thinking about investing $30,000 in a project that will generate after-tax cash flows of $12,000 per year for the next three years and an additional $20,000 in the fourth year. The required rate of return is 13%.
=10.61
Answer: The net present value (NPV) method has the following benefits:
IRR = r = the discount rate that makes the net present value of the investment equal to zero.
Question 39: What are the disadvantages of using the Internal Rate of Return (IRR) method?
Question 41: What are the PBP decision criteria?
Answer: The Payback Period (PBP) method has the following disadvantages:
a= the year of the cumulative inflow closest to the year of the initial cash outflow
c=Cumulative inflow of a year
Answer: The following are the benefits of the discounted payback period (DPBP) method:
Question 47: What is the formula of an average or accounting rate of return (ARR)?
ARR = Average net income/Average Investment
Answer: The following are the ARR decision criteria:
Question 49: What are the benefits of calculating the average rate of return (ARR)?
Question 50: What are the disadvantages of using the Average Rate of Return (ARR) method?
Answer: The following is the formula for calculating PI:
PI= 1+(NPV/Initial Investment)
The example below will show you how to calculate the Profitability Index (PI).
Assume ABC Corporation is considering a $42,000 investment in a capital project that will generate after-tax cash flows of $14,000 per year for the next five years. The cost of capital is 10%.
Initial Investment = $42,000
Question 53: What are the advantages of the Profitability Index (PI) method?
Answer: The three important differences between capital budgeting and capital rationing are as follows:
Question 58: Which technique, NPV or IRR, is preferred and why?
Answer: Even though the NPV method is better in theory, financial managers prefer the IRR method for the following reasons:
I hope that by the end of this post, you will have a good understanding of the “ capital budgeting ” chapter.
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Top 25 Questions and Answers-Capital Budgeting [With PDF]
Capital budgeting is an important managerial activity. In this post, we’ll go through the top 25 Questions and Answers-Capital Budgeting .
So let’s get started.
Questions and Answers-Capital Budgeting
Question-02: What are the proposals or projects of capital budgeting?
Question-03: What are the proposals or projects according to their relative importance?
Question-05: What is the importance of capital budgeting?
Answer: The process of capital budgeting is as follows:
Question-09: What are the methods of evaluating capital expenditure or investment wroth?
Answer: the methods of evaluating capital expenditure or investment wroth are as follows:
Question-10: What is the best method for evaluating capital expenditure?
Question-11: What is the Cash payback method?
Answer: The cash payback method determines the amount of time it would take to recover the cost of capital expenditure from the investment’s net annual cash flow.
Answer: the disadvantages or limitations of Payback period method are as follows:
Question-14: What is the annual rate of return method?
Answer: Annual rate of return method determines the profitability of capital expenditure by dividing expected annual net income by the average investment.
Question-15: What is the cost of capital?
Answer: Discounted cash flow method considers both the estimated total net cash flows from the investment and the time value of money.
Question-18: What is the internal rate of return (IRR) method?
Answer: Internal rate of return (IRR) method is the method that finds the interest yield of the potential investment.
Answer: When the initial capital outlay is subtracted from the discounted net cash flows, the difference is known as the net present value (NPV).
Question-21: What are the advantages or benefits of Net present value (NPV) method?
Answer: The disadvantages or limitations of Net present value (NPV) method are as follows:
Question-23: What is the required rate of return?
Answer: This method calculates the present value of the project’s cash flow and divides this present value by the present value of the net investment to determine the profitability index.
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Capital Budgeting: Important Problems and Solutions
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Written by True Tamplin, BSc, CEPF®
Reviewed by subject matter experts.
Updated on January 30, 2024
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The cost of a project is $50,000 and it generates cash inflows of $20,000, $15,000, $25,000, and $10,000 over four years.
Required: Using the present value index method, appraise the profitability of the proposed investment, assuming a 10% rate of discount.
The first step is to calculate the present value and profitability index.
1 | 20,000 | 0.909 | 18,180 |
2 | 15,000 | 0.826 | 12,390 |
3 | 25,000 | 0.751 | 18,775 |
4 | 10,000 | 0.683 | 6,830 |
Total present value = $56,175
Less: initial outlay = $50,000
Net present value = $6,175
Profitability Index (gross) = Present value of cash inflows / Initial cash outflow
= 56,175 / 50,000
Given that the profitability index (PI) is greater than 1.0, we can accept the proposal.
Net Profitability = NPV / Initial cash outlay
= 6,175 / 50,000 = 0.1235
N.P.I. = 1.1235 - 1 = 0.1235
Given that the net profitability index (NPI) is positive, we can accept the proposal.
A company is considering whether to purchase a new machine. Machines A and B are available for $80,000 each. Earnings after taxation are as follows:
1 | 24,000 | 8,000 |
2 | 32,000 | 24,000 |
3 | 40,000 | 32,000 |
4 | 24,000 | 48,000 |
5 | 16,000 | 32,000 |
Required: Evaluate the two alternatives using the following: (a) payback method, (b) rate of return on investment method, and (c) net present value method. You should use a discount rate of 10%.
(a) Payback method
24,000 of 40,000 = 2 years and 7.2 months
Payback period:
Machine A: (24,000 + 32,000 + 1 3/5 of 40,000) = 2 3/5 years.
Machine B: (8,000 + 24,000 + 32,000 + 1/3 of 48,000) = 3 1/3 years.
According to the payback method, Machine A is preferred.
(b) Rate of return on investment method
Total Cash Flows | 1,36,000 | 1,44,000 |
Average Annual Cash Flows | 1,36,000 / 5 = $27,000 | 1,44,000 / 5 = $28,800 |
Annual Depreciation | 80,000 / 5 = $16,000 | 80,000 / 5 = $16,000 |
Annual Net Savings | 27,200 - 16,000 = $11,200 | 28,800 - 16,000 = $12,800 |
Average Investment | 80,000 / 2 = $40,000 | 80,000 / 2 = $40,000 |
ROI = (Annual Net Savings / Average Investments) x 100 | (11,200 / 40,000) x 100 | (12,800 / 40,000) x 100 |
= 28% | = 32% |
According to the rate of return on investment (ROI) method, Machine B is preferred due to the higher ROI rate.
(c) Net present value method
The idea of this method is to calculate the present value of cash flows.
1 | .909 | 24,000 | 21,816 | 8,000 | 7,272 |
2 | .826 | 32,000 | 26,432 | 24,000 | 19,824 |
3 | .751 | 40,000 | 30,040 | 32,000 | 24,032 |
4 | .683 | 24,000 | 16,392 | 48,000 | 32,784 |
5 | .621 | 16,000 | 9,936 | 32,000 | 19,872 |
Net Present Value = Present Value - Investment
Net Present Value of Machine A: $1,04,616 - $80,000 = $24,616
Net Present Value of Machine B: $1,03,784 - 80,000 = $23,784
According to the net present value (NPV) method, Machine A is preferred because its NPV is greater than that of Machine B.
At the beginning of 2024, a business enterprise is trying to decide between two potential investments .
Required: Assuming a required rate of return of 10% p.a., evaluate the investment proposals under: (a) return on investment, (b) payback period, (c) discounted payback period, and (d) profitability index.
The forecast details are given below.
Cost of Investment | $20,000 | 28,000 |
Life | 4 years | 5 years |
Scrap Value | Nil | Nil |
Net Income (After depreciation and tax) | ||
End of 2024 | $500 | Nil |
End of 2025 | $2,000 | $3,400 |
End of 2026 | $3,500 | $3,400 |
End of 2027 | $2,500 | $3,400 |
End of 2028 | Nil | $3,400 |
It is estimated that each of the alternative projects will require an additional working capital of $2,000, which will be received back in full after the end of each project.
Depreciation is provided using the straight line method . The present value of $1.00 to be received at the end of each year (at 10% p.a.) is shown below:
Year | 1 | 2 | 3 | 4 | 5 |
P.V. | 0.91 | 0.83 | 0.75 | 0.68 | 0.62 |
Calculation of profit after tax
2024 | 500 | 5,000 | 5,500 | - | 5,600 | 5,600 |
2025 | 2,000 | 5,000 | 7,000 | 3,400 | 5,600 | 9,000 |
2026 | 3,500 | 5,000 | 8,500 | 3,400 | 5,600 | 9,000 |
2027 | 2,500 | 5,000 | 7,500 | 3,400 | 5,600 | 9,000 |
2028 | - | - | - | 3,400 | 5,600 | 9,000 |
(a) Return on investment
Investment | 20,000 + 2,000 = 22,000 | 28,000 + 2,000 = 30,000 |
Life | 4 years | 5 years |
Total Net Income | $8,500 | $13,600 |
Average Return ($) | 8,500 / 4 = 2,125 | 13,600 / 5 = 2,720 |
Average Investment ($) | (22,000 + 2,000) / 2 = 12,000 | (30,000 + 2,000) / 2 = 16,000 |
Average Return on Average Investment ($) | (2,125 / 12,000) x 100 = 17.7% | (2,720 / 16,000) x 100 = 17% |
(b) Payback period
2024 | 5,500 |
2025 | 7,000 |
2026 | 7,500 (7,500 / 8,500 = 0.9) |
Payback period = 2.9 years
$ | |
2024 | 5,600 |
2025 | 9,000 |
2026 | 9,000 |
2027 | 4,400 (4,400 / 9,000 = 0.5) |
Payback period = 3.5 years
(c) Discounted payback period
2024 | 5,005 | 2024 | 5,096 |
2025 | 5,810 | 2025 | 7,470 |
2027 | 6,375 | 2026 | 6,750 |
2028 | 2,810 (2,810 / 5,100 = 0.5) | 2027 | 6,120 |
2028 | 2,564 (2,564 / 5,580 = 0.4) | ||
Discounted Payback Period = 3.5 years | Discounted Payback Period = 4.4 years |
(d) Profitability index method
Gross Profitability Index | (22,290 / 20,000) x 100 = 111.45% | (31,016 / 28,000) x 100 = 111.08% |
Net Profitability Index | (2,290 / 20,000) x 100 = 11.45% | (3,016 / 28,000) x 100 = 10.8% |
Capital Budgeting: Important Problems and Solutions FAQs
What are some examples of capital budgeting.
Examples of capital budgeting include purchasing and installing a new machine tool in an engineering firm, and a proposed investment by the company in a new plant or equipment or increasing its inventories.
What is the process of capital budgeting?
It involves assessing the potential projects at hand and budgeting their projected cash flows. Once in place, the present value of these cash flows is ascertained and compared between each project. Typically, the project that offers the highest total net present value is selected, or prioritized, for investment.
What are the primary capital budgeting techniques?
The primary capital budgeting techniques are the payback period method and the net present value method.
What are the capital budgeting sums?
The capital budgeting sums are the amounts of money involved in capital budgeting.
What are the capital budgeting numericals?
The capital budgeting numericals are the various types of numbers used in applying different capital budgeting techniques.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .
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Capital Budgeting Questions And Answers
This essay sample essay on Capital Budgeting Questions And Answers offers an extensive list of facts and arguments related to it. The essay’s introduction, body paragraphs and the conclusion are provided below.
1. Why should the required rate of return for a capital budgeting problem be project specific? Doesn’t the firm just have to satisfy an overall cost-of-capital requirement?
Answer: The required rate of return for a capital budgeting problem is project specific because the firm is viewed as a portfolio of projects owned by the shareholders.
It is the shareholder’s perspective that matters, and it is their opportunity cost that gives the required rate of return for a project. The question that the managers should ask is the following: If the shareholders were to receive the cash flows from the project directly, what risk would they associate with the cash flows? Notice that this immediately suggests that the required rate of return should be project specific and that it should reflect the market risk that continues to be present when an investor holds a large, well-diversified portfolio.
International Capital Budgeting Ppt
2. What is the conceptual foundation of the flow-to-equity approach to capital budgeting?
Answer: In the flow-to-equity approach to capital budgeting, the after-tax cash flows that are available to be paid to equity holders are discounted at the levered equity required rate of return. Hence, the interest costs of debt are subtracted from the earnings of the firm in considering the amount of tax the firm will owe, and the interest payments that the firm must make are taken out of the residual free cash flow.
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The discount rate for these levered equity flows therefore must reflect the fact that equity is a residual claimant on the cash flows of the firm.
3. What is the weighted average cost of capital?
Answer: The weighted average cost of capital (WACC) approach to capital budgeting involves forecasting the all-equity free cash flows of the firm and then finding the value of the levered firm by discounting the all-equity free cash flows at an appropriate WACC. It is a one-step procedure for finding the value of the operating assets plus the value of the interest tax shields. The weighted average cost of capital is the weighted sum of the after-tax required rate of return on the firm’s debt and the required rate of return on the firm’s levered equity. The weight for the after-tax rate of return on the firm’s debt is the ratio of the market value of the debt to the market value of total assets. The weight for the rate of return on the firm’s levered equity is the ratio of the market value of the equity to the market value of total assets. Once the total value of the firm is found, the market value of equity is found by subtracting the market value of the debt from the value of the levered firm.
4. Should a firm ever accept a project that has a negative NPV when discounted at the weighted average cost of capital?
Answer: One reason we like the adjusted net present value approach to valuation is that it specifies all of the possible sources of value for a project. The WACC approach works well for projects that will support a certain percentage of leverage and that have no other associated features, such as interest subsidies or growth options that might add value to the project. If the only cash flows from the project are the ones that are being discounted and there are no other sources of value, other than the interest tax shields that are included in the WACC analysis, then the WACC approach finds the market value of the levered project. If this is negative, the project should be rejected.
5. Can you do capital budgeting for a foreign project using a domestic currency discount rate? Explain your answer.
Answer: The answer to the question is yes; you certainly can do capital budgeting for a foreign project using a domestic currency discount rate. You just have to be careful to match the cash flows with the discount rate. One fundamental principle of capital budgeting is that the discount rate should reflect the currency of denomination of the expected cash flows that are being discounted. If a foreign project is providing expected future foreign currency cash flows, these can be discounted to the present using a foreign currency discount rate that reflects the riskiness of the project. The domestic currency present value of this foreign currency present value can then be determined by converting from the present value of foreign currency into the present value of domestic currency using the spot exchange rate. Alternatively, one can generate expected future domestic currency cash flows in future years by converting expected future foreign currency cash flows into expected future domestic currency cash flows using expected future spot exchange rates. These expected future domestic currency cash flows should then be discounted to the present using an appropriate domestic currency discount rate.
6. Why might it be important to use period-specific discount rates when doing capital budgeting?
Answer: We know that risk free spot interest rates are the appropriate discount rates for cash flows from risk free pure discount bonds. If the term structure of spot interest rates is not flat, that is, if it is upward sloping or downward sloping, using the same discount factor for all the cash flows of a risky project will not be correct. If the term structure is upward sloping, and you use the single long-term rate as the base for your risk adjusted discount rate, you will needlessly penalize the earlier cash flows from the project because short-term spot interest rates are lower than long-term spot interest rates. Conversely, if the term structure is downward sloping, and you use the single long-term rate as the base for your risk adjusted discount rate, you will be incorrectly enhancing the value of the earlier cash flows from the project because the short-term interest rates that should be used to discount near-term cash flows are higher than the long-term rates that should be used to discount longer-term cash flows.
7. Why is it necessary to consider forecasts of real currency appreciation and depreciation when doing an international capital budgeting analysis?
Answer: The most important reason to consider forecasts of real currency appreciation or depreciation is that it is likely that a change in the real exchange rate will affect the cash flows of the project. Remember that a real depreciation of the domestic currency makes domestic exporters more profitable and domestic importers less profitable. Also, real appreciations typically reverse themselves somewhat slowly, so that knowledge of the current situation is necessary to know whether the future expected changes in the real exchange rate are going to enhance or detract from the cash flows of the project. Finally, if forecasts of nominal exchange rates are being made with uncovered interest rate parity, these will be somewhat different than forecasts based on relative purchasing power parity. If the market thinks that there will be a real appreciation or depreciation in the future, forecasts of nominal exchange rates based on relative purchasing power parity will not be correct.
8. What is the rate of return on invested capital? How is it calculated?
Answer: The rate of return on invested capital is the free cash flow of the firm divided by the firm’s total assets. If the firm is earning its weighted average cost of capital, the rate of return on invested capital should equal its WACC. If we think of an investment that the firm is making, the rate of return on capital expenditure is the incremental free cash flow divided by the CAPX. Here again, it is important for the firm to do investments in which the rate of return on invested capital equals or exceeded the WACC – otherwise the firm is destroying value.
9. If you borrow a foreign currency, what interest deduction would you receive on your taxes?
Answer: When you borrow in a foreign currency, you get an interest deduction for the domestic currency value of the foreign interest that you pay.
10. If you borrow a foreign currency, are there any capital gains taxes to worry about?
Answer: If you borrow in a foreign currency, there are capital gains taxes to worry about. If the domestic currency has appreciated relative to the foreign currency between when the initial borrowing took place and when the principal is being repaid, it takes less of the domestic currency to repay the foreign currency principal than the amount of domestic currency that you had access to when you borrowed. Thus, you are repaying less than you borrowed and that capital gain is income to you and is taxed by the fiscal authorities. Conversely, if the domestic currency has depreciated relative to the foreign currency between when the initial borrowing took place and when the principal is being repaid, it takes more of the domestic currency to repay the foreign currency principal than the amount of domestic currency that you had access to when you borrowed. Thus, you are repaying more than you borrowed and that capital loss is deductible for tax purposes.
11. Why might a manager accept a high-variance, low-value project instead of a low-variance, high-value project?
Answer: Shareholders only gain in good states of the world, and if the variance of the firm is higher, they gain more in those good states. Holders of debt get paid their full amount in good states of the world, and they get the value of the firm in the bad states of the world. By accepting a high variance project, managers may be able to shift some value from bondholders to shareholders. In such a situation the manager is said to have engaged in asset substitution.
12. Why would a manager not accept a positive net present value project?
Answer: The value of the project accrues to the firm as a whole. Thus, if the firm has risky debt in its capital structure, some of the value of the project will accrue to the bondholders, and the remainder will accrue to the equity holders. The increase in the value of equity may be less than the equity holders must contribute to finance the investment in the project. Hence, a manager acting in the interests of the shareholders would forego such a project. This situation is referred to as an underinvestment problem.
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All you need to know about Capital Budgeting
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Table of content
What is Capital budgeting?
Pay-back period, net present value (npv), internal rate of return (irr) or internal rate of return (tir), average accounting yield, the focus of the investment evaluation, the economic-financial evaluation, the ingredients:, the capital budget in a nutshell.
The modern CFO knows how to govern the process and the tools that allow him to evaluate economic and financial sustainability. The evaluation of investments is not an exclusively strategic judgment but concerns the entire process of creating corporate economic value. This is a reflection shared by managers, aware that the starting point of the creation of economic value for a company is placed in the allocation of capital between the different investment alternatives. Here’s everything you need to know about capital budgeting .
As part of the planning and control process, a capital budget is a central tool with which management establishes the optimal allocation of financial resources. In short, it is a matter of evaluating alternative investment projects to achieve profit levels consistent with the assumed risk profile. It is evident that capital budgeting decisions represent one of the main responsibilities of management, being able, if not taken correctly, to undermine corporate competitiveness. Furthermore, it should be considered that investment analysis is something that does not focus exclusively on industrial projects only, but concerns investment decisions such as the launch of new products, the purchase of shares, shares or securities of different nature or research and advertising projects that impact on the corporate image. Capital budgeting is nothing more than "analysis and evaluation" of the economic returns that could be obtained from the financing of investment projects.
Some classic examples of corporate capital budgeting:
- acquire a new plant that increases business productivity
- finance customers by giving them more credit
- finance a research project
- buy equity securities
- acquire a company
- acquire a corporate brand
For the evaluation of the economic returns of the investments, there are mainly four techniques:
Evaluate the period of time that elapses between the capital advance and the financial return of the same. For example, I spend 100 thousand dollars for a piece of more technologically advanced machinery, and the new productivity allows me a profit increase of 33 thousand dollars per year. In this case, with a bit of approximation, we can say that the payback period is three years.
Adds the incoming and outgoing cash flows in the various years of evaluation of the investment and updates its value by applying a discount rate. It is the most used and reliable one of the four methods.
It derives from the previous method but reasons in reverse. It does not start from a specific discount rate but calculates the discount rate that generates a discounted cash flow zero. The investment is accepted or refused if the discount rate calculated in this way is respectively lower or higher than the degree of risk assigned to the activity to be financed.
The average book yield is calculated by dividing the average annual profits by the value of the average annual book investment.
The possible investment analysis profiles concern the following areas of assessment:
- STRATEGIC, in which consistency with the company competitive profile is verified through the impact on the competitive strength or attractiveness of the business;
- TECHNIQUE, through which the various technological or commercial options are analyzed in terms of effectiveness and efficiency of operations;
- ECONOMIC, which verifies the relationship between the resources absorbed (investment) and those released by the project over time (future benefits) through synthetic indicators;
- FINANCIAL, through which the compatibility of the investment flows with the income and expenses profile is assessed, both from a dimensional and temporal point of view.
A great chef, to make a delicacy, must have first quality ingredients and a recipe that distinguishes him. In the same way, the CFO, to carry out an eco-fin effective evaluation, must have the correct "ingredients" and the right "recipe" with which to combine them.
The ingredients represent the elements to make a choice among the investment alternatives. It is necessary to know them thoroughly. On the other hand, the recipes also indicate the operating methods with which to combine the investment alternatives to reach a synthetic parameter of classification of investment opportunities.
The CFO has five tools that can help him in the choices:
- The invested capital, broken down into three subcategories: ● The declination of the individual types of investment, in the case of a significant articulation of the project, for example, in the construction of the factories; ● This is necessary to have a detail of the useful life of the investments in which the project is divided, so as to be able to derive the depreciation; ● The temporal distribution of investmentsThe secondary costs to be incurred immediately or over the period, so that the investment guarantees its performance during its useful life or within the identified time horizon
- The duration of the investment (time horizon), which leads us to define: ● The time horizon of the investment analysis, which is affected by the sector in which the company operates the type of investment taken into consideration, the predictability of the results, and the economic life of the project. ● The duration of the periods in which the periodic financial events are to be distributed
- The metric to be used to evaluate the investment. Taking into account that the economic evaluation of investment has as its object, the analysis of the resources absorbed (investment). The project releases them over time (future benefits), the practice uses cash flows, which in this case are identified by the Cash Flow Operating (Operating Free Cash Flow)
- The financial value of time: In finance, it is always associated with the concept of interest rate, which is intended as a "reward" for giving up immediate consumption.
- When evaluating the investments, it must be considered that the cash flows of the project, divided into sub-periods (Fcn), belong to different moments and cannot be added together. Through the discounting process. Therefore, the various amounts will be normalized according to the logic of the financial value of time, thus being able to determine the present value of the profile of future cash flows.
- The discount rate: The theory and practice refer to the opportunity cost of the project, i.e., the return achievable with an equivalent investment in the amount, in the distribution of flows, and in the risk profile. Cost/opportunity that is based on the concept behind finance: the correlation between risk and return.
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From this, we understand how, to determine the value created/destroyed, it is necessary to identify the determinants of the cost of capital, understood as cost/opportunity. Briefly, the key elements through which the cost of corporate capital is determined are:
- the cost of the individual sources of financing, i.e., the cost/opportunity of the shareholders (Ke) and the cost of the interest rate paid to the banks for the credit lines received (Kd)
- the weight of the sources of financing, i.e., the weight as a percentage of the capital contributed by the shareholders (Net Equity / Net Invested Capital) and the weight as a percentage of the capital contributed by the banks (Net Financial Position / Net Invested Capital)
By combining the highlighted elements, we obtain that the cost of capital is determined by the weighted average cost of capital (WACC).
In recent times, many companies are implementing capital budget processes with which to select and monitor investment options. Given that the focus of the capital budget is, under the direction of the CFO, to develop a process of sharing between the management of the rationale for economic-financial sustainability and its feasibility. It is clear that the role of the CFO is to offer its own skills at the service of management.
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Capital Budgeting essay
Capital budgeting comprises an integral part of the effective business development because companies have to focus on the most prospective and profitable projects with the balanced risk-returns ratio. Capital budgeting is the process, which determines whether the particular project is worth pursuing. Investing too much into capital budgeting leads to the narrow development of the company with the focus on a few secure and profitable projects, while others projects may remain under-estimated and the company can fail to invest into a risky but potentially successful project. Investing too little into capital budgeting can raise the problem of the low effectiveness of company’s investments, if the company fail to determine priority projects which are the most prospective and beneficial for its further business development.
Sunk costs are costs that cannot be changed and are irrelevant to the decision making process because they are the past costs that have been already spent but currently the equipment, machinery or other items purchased are virtually useless. Opportunity costs are costs involving the alternative chosen that has brought profits to the company. In contrast to sunk costs, which brought financial losses to the company, opportunity costs bring profits. However, both opportunity and sunk costs have ceased their impact and cannot be used anymore.
Capital budgeting is associated with three types of risks, including stand-alone risk, corporate risk, and market risk. Stand-alone risk is the risk associated with a particular project and means that the company faces a high risk of the failure of completing the particular project successfully. The corporate risk implies that the entire company is at risk and its business operations are under a threat. Therefore, the company may face a risk of losing its marketing position or even run bankrupt. As for the market risk, this is the risk associated with the possible downturn or crisis within the market, as was the case of the housing market in the US in 2007-2008. Each type of risk is necessary to assess and control because the failure to identify either risk may lead to the failure of the project.
The qualitative risk focuses on the assessment of actual risks associated with a particular project or company. However, the qualitative risk is subjective because it relies on the assessment of qualitative attributes and does not involve quantitative ones. Nevertheless, this risk is essential to assess to understand prospects and risks associated with a particular project to the full extent. The qualitative risk focuses on the assessment of the particular project and related risks from the qualitative standpoint that means that the assessment involves the analysis of the qualitative information related to the project and associated risks. As a result, the company conducting the assessment of the qualitative risk can determine whether the project is worth implementing or not. For example, the introduction of a new product is accompanied by the qualitative risk assessment. The company monitors the customer behavior and conducts interviews of a group of customers to assess the qualitative risk. On the ground of their responses, the company makes conclusion concerning the risk. Obviously, such risk assessment is subjective because it is grounded on subjective responses of customers. Nevertheless, such risk assessment helps to understand better real world prospects of a particular project.
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Essay on Capital Budgeting | Functions | Financial Management
Here is an essay on ‘Capital Budgeting’ for class 11 and 12. Find paragraphs, long and short essays on ‘Capital Budgeting’ especially written for school and college students.
Essay on Capital Budgeting
Essay Contents:
- Essay on the Techniques of Capital Budgeting
Essay # 1. Definition of Capital Budgeting:
Capital budgeting refers to the process a firm uses to make decisions concerning investments in the long-term assets of the firm. The general idea is that the capital, or long-term funds raised by the firms are used to invest in assets that will enable the firm to generate revenues several years into the future.
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Some of the definitions of capital budgeting are:
Capital budgeting is the process by which the financial manager decides whether to invest in specific capital projects or assets.
Capital budgeting (or investment appraisal) is the planning process used to determine whether a firm’s long-term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.
Capital budgeting is a method of evaluating investment proposals to determine whether they are financially sound, and to allocate limited capital resources to the most attractive proposals.
Essay # 2. Meaning of Capital Budgeting:
The term ‘capital budgeting’ is used interchangeably with capital expenditure decisions, capital expenditure managements, long-term investment decision, management of fixed assets and so on.
The budget provides a guidance as to the amount of capital that may be needed for procurement of capital assets during the budget period. The budget is prepared after taking into account the available productive capacities, probable reallocation of existing assets and possible improvement in production techniques. If necessary, separate budgets may be prepared for each item of assets, such as a building budget, a plant and equipment budget, etc.
The capital budgeting decision, therefore, involves a current outlay or series of outlays of cash resources in return for an anticipated flow of future benefits. In other words, the system of capital budgeting is employed to evaluate expenditure decisions which involve current outlays but are likely to produce benefits over a period of time longer than one year.
Capital expenditure management includes addition, disposition, modification and replacement of fixed assets.
Following are the basic features of capital budgeting:
(a) It has potentially large anticipated benefits.
(b) It has a relatively high degree of risk.
(c) It has a relatively long-time period between the initial outlay and the anticipated return.
Essay # 3. Importance of Capital Budgeting :
1. Capital budgeting decisions are of paramount importance in financial decision-making. Such decisions affect the profitability of a firm. They also have a bearing on the competitive position of the enterprise. Capital budgeting decisions determine the future destiny of the company.
An opportune investment decision can yield spectacular returns. On the other hand, an ill-advised and incorrect investment decision can endanger the very survival even of the large-sized firms. A few wrong decisions and the firm may be forced into bankruptcy.
2. A capital expenditure decision has its effect over a long time-span and inevitably affects the company’s future cost structure.
3. Capital investment decisions, once made are not easily reversible without much financial loss to the firm. It is because there may be no market for secondhand plant and equipment and their conversions to other uses may not be financially feasible.
4. Capital investment involves costs and the majority of the firms have scarce capital resources this underlines the need for thoughtful, wise and correct investment decisions, as an incorrect decision would not only result in losses but also prevent the firm from earning profits from other investments which could not be undertaken for want of funds.
Essay # 4. Difficulties in Capital Budgeting :
Capital expenditure decisions are of considerable significance to the firm as the future success and growth of the firm depends heavily on them. Unfortunately, they are not easy to take.
There are a number of factors responsible for this:
1. The benefits from investments are received in some future period. The future is uncertain. Therefore, an element of risk is involved. A failure to forecast correctly will lead to serious errors which can be corrected only at considerable expense.
2. Problems also arise because costs incurred and benefits received from the capital budgeting decisions occur in different time periods. They are not logically comparable because of the time value of money.
3. It is not often possible to calculate in strictly quantitative terms all the benefits or the costs relating to a particular investment decision.
Capital budgeting decisions can be of two types :
(i) Those which expand revenues;
(ii) Those which expand costs;
A fundamental difference between the above two categories of investment decisions lies in the fact that cost-reduction investment decisions are subject to less uncertainty in comparison to the revenue-affecting investment decisions.
Thus, capital budgeting refers to the total process of generating, evaluating, selecting and following up on capital expenditure alternatives. The firm allocates or budgets financial resources to new investment proposals. Capital budget is a statement of expenditure on fixed assets or long-term projects and the benefits of which are likely to accrue in future.
The process of capital budgeting involves:
(a) Evaluating investment proposals;
(b) Measuring the benefits, and
(c) Selecting a project on the basis of a pre-determined criterion.
Essay # 5. Techniques of Capital Budgeting :
The prime task of the capital budgeting is to estimate the requirements of capital investment of a business. There are a number of techniques/methods of capital budgeting available.
i. Traditional Methods:
a. Payback Period.
b. Average rate of Return.
ii. Discounted Methods:
a. Net Present Value.
b. Internal Rate of Return.
c. Profitability Index.
a. Pay Back Period:
Payback period is the most widely used measure for evaluating potential investments. Payback period focuses on recovering the cost of investments. Payback period is the time required (months or years) for a company to recover its original investment in project.
There are two ways of calculating the payback period:
1. The first method can be applied when the cash inflows are uniform for each year of project’s life.
The formula for Payback Period (PP) is:
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Capital Budgeting Practice Essay
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Preferred capital budgeting
Cost of capital estimation techniques, list of references.
NPV and IRR are the most recurrently used capital budgeting practice, judging by the retorts of the interviewees (Graham & Harvey, 2001). The outcomes depended on the nature of the firm and its supervisory distinctiveness. Large firms are comprehensively more prone to use NVP as contrasted to miniature firms.
Vastly levered firms are greatly probable to use NPV and IRR and SSA than are groups with diminutive debt ratios. There is also a noteworthy divergence between high- and low-average small firms and high- and low-average large firms. The credentials of the CEO, for example, those with MBA, ally them to choose the NPV methodology. Public corporations that pay dividends are fundamentally more apt to use NPV and IRR than private groups or those who do no recompense dividends.
Apart from the NPV and IRR, the payback routine is another fashionable procedure of capital budgeting despite its conspicuous inadequacies. The process neglects the time value of money clear of the subjective stop date. Diminutive firms thus use the structure almost as recurrently as they use NPV and IRR. CEOs without MBAs are more plausible to execute this principle.
While exploring great and diminutive firms, long-standing and older CEOs desire payback scheme compared to younger CEOs. The discounted payback, a routine that eradicates one of the payback measure’s insufficiencies by evidencing for the implication of time and money, is not fashionable with some firms. Some viewpoints relate the payback methodology to capital constrained firms (Graham & Harvey, 2001).
Several institutions use the EM approach to appraise projects. The findings specify that a highly levered organization is extensively more plausible to use earning multiples (EM). The extent of the business also influences the relevance of this tactic.
The CAPM, multibeta CAPM, DD method, and the AHR are among the traditions of manipulating the cost of equity capital. The answers indicate that CAPM is the most favored method of approximating the cost of equity capital, followed by the ASR. Very few firms prefer the dividend discount method.
The appliance of CAPM is, however, not seen to be apt (Graham & Harvey, 2001), judging by the findings, irrespective of its current reputation. It is not measured as an apposite method even when applied fittingly. Huge firms have an elevated likelihood of using the CAPM compared to lesser firms.
Diminutive organizations base their choices on the partiality of their investors. CEOs with MBAs are more plausible to employ the single-factor CAPM as compared to CEOs devoid of MBAs.
Communal, small running and high foreign sales groups favor the use of CAPM. The result on public and personal organizations also depends on the magnitude of the institute. Based on management ownership, the distinctions in the use of the CAPM pertain only on diminutive firms. CAPM is inversely interconnected to managerial ownership among diminutive organizations.
The investigation has numerous dissimilarities from the prior works. The previous work utterly focuses on the principal firms. The illustration study in the present essay is more wide-ranging than the earlier inspection (Graham & Harvey, 2001), thus the capacity to make inferences from the diverse group characteristics. More assessment procedures are also studied, dissimilar to the earlier methods which only evaluated NPV against IRR scrutiny.
The conclusions of this study differ from preceding surveys chiefly because of the diversification of the sample. It is necessary, however, to note that the conclusions drawn symbolize personal viewpoints without any substantiation of their appliance.
Present studies specify that the CAPM is the most ideal system to approximate the cost of capital while preceding studies designate it as the least used method. While the DD method lies last in latest studies, it was beforehand more favored than CAPM. NPV is noticeably more crucial currently as a project valuation procedure than as recorded in earlier-period assessments (Graham & Harvey, 2001).
There are some portions of the assembly which are shared, for example, public conglomerates are habitually large firms and thus would be seen to prefer the same slant for capital budgeting and cost of capital inference. Diminutive firms are less refined in the appraisal of perilous schemes. Universally, NPV and CAPM are the most broadly used suppositions in the consideration of projects and inference of the cost of equity.
There has been a modification from before years where large companies favored DCF (Arnold & Hatzopoulos, 2000), compared presently where huge firms use NPV and IRR. A superior number of minor organizations are also employing these routines. For larger organizations, NPV has surpassed IRR as a favorite routine, unlike preceding assessments indicating that IRR was subject.
DCF has gained status, owing to procedural advancements, which have enhanced simplicity of computations, and at a cost-effective price. Routines which do not employ discounting are still being practiced, in amalgamation with NVP and IRR systems.
Beforehand, firms employed a restricted number of techniques, compared to now where a permutation of more than three procedures is employed. The use of all the four systems has gained domination, followed by the amalgamation of payback, NPV and IRR. There is no exceptional, exact technique hence the need for combinations.
This is due to the proportions of the effect of information asymmetry, real options and budgeting realization impediments (Arnold & Hatzopoulos, 2000). ¼ of the responses in the survey evidenced an alteration in approach, while faintly equal prominence placed on cash flow based routines, IRR and NVP. Some, however, still favored the long-established methods.
There are hypothetical, realistic and experimental reservations for the CAPM methodology. The findings further state that it is convoluted to use the CAPM to resolve the cost of capital, citing the weight of accessibility of reliable data as compared to the exactitude of a system.
The substantiation of the examination signifies that the theory-practice gap has been lessened. DCF was beforehand used by half of the huge associations while at present, all the huge firms are applying NPV and IRR methodologies. A superior proportion of small firms are also applying these systems.
The prevalent awareness of the DCF signifies that time-honored “theoretically inferior” practices maintain an excellently relentless hold on practice (Arnold & Hatzopoulos, 2000). There is a prospect that the theory-practice gap is moderately closing in, due to the progression from propositions to practice.
The NPV slant has been emphasized by textbooks, which declare that the practice is superior to other methodologies. The findings of the exploration prove that viewpoints presented by manuals are increasingly being acknowledged.
Arnold & Hatzopoulos’ paper notes that the augmentation in the embracing of DCF techniques has not surpassed the payback method. The payback system shows an insignificant lessening in its use, but it still remains at a high level. It also does not support the assertion that the trend towards the use of long-term capital budgets was arrested in the 80s.
In both studies, NPV is the preferred selection by large firms compared to diminutive firms (Graham & Harvey, 2001). The familiarity of the CEO and whether they have an MBA pressure decision making in both cases. CEOs with MBAs prefer the CAPM slant. The payback technique is an admired observance which is still practiced and combined with other procedures. Textbook practices are recurrently followed for financial analysis by some societies. Diminutive firms are extensively less urbane in the assessment of uncertain projects.
There is a lessened use of CAPM methodologies as explained by Arnold & Hatzopoulos’, while the other study signifies a predilection for the design (Arnold & Hatzopoulos, 2000). Their paper also elucidates the development of the presented techniques, as compared to Graham and Harvey who deduct how corporations are mingling the techniques.
Arnold, G & Hatzopoulos, P 2000, The theory-practice gap in capital budgeting: evidence from the United Kingdom, Journal of business finance & accounting, 27 (5) & (6), June/July 2000, 0306-686X
Graham, J & Harvey, C 2001, The theory of practice of corporate finance: evidence from the field, Journal of Financial Economics 60 (2001) 187}243
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Capital Budgeting: Definition, Methods, and Examples
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What Is Capital Budgeting?
Capital budgeting is a process that businesses use to evaluate potential major projects or investments. Building a new plant or taking a large stake in an outside venture are examples of initiatives that typically require capital budgeting before they are approved or rejected by management.
As part of capital budgeting, a company might assess a prospective project's lifetime cash inflows and outflows to determine whether the potential returns it would generate meet a sufficient target benchmark. The capital budgeting process is also known as investment appraisal.
Key Takeaways
- Capital budgeting is used by companies to evaluate major projects and investments, such as new plants or equipment.
- The process involves analyzing a project's cash inflows and outflows to determine whether the expected return meets a set benchmark.
- The major methods of capital budgeting include discounted cash flow, payback analysis, and throughput analysis.
Investopedia / Lara Antal
How Capital Budgeting Works
Ideally, businesses could pursue any and all projects and opportunities that might enhance shareholder value and profit. However, because the amount of capital any business has available for new projects is limited, management often uses capital budgeting techniques to determine which projects will yield the best return over an applicable period.
Although there are a number of capital budgeting methods , three of the most common ones are discounted cash flow, payback analysis, and throughput analysis.
Discounted cash flow (DCF) analysis looks at the initial cash outflow needed to fund a project, the mix of cash inflows in the form of revenue, and other future outflows in the form of maintenance and other costs.
These cash flows, except for the initial outflow, are discounted back to the present date. The resulting number from the DCF analysis is the net present value (NPV) . The cash flows are discounted since present value assumes that a particular amount of money today is worth more than the same amount in the future, due to inflation.
In any project decision, there is an opportunity cost, meaning the return that the company would have received had it pursued a different project instead. In other words, the cash inflows or revenue from the project need to be enough to account for the costs, both initial and ongoing, but also to exceed any opportunity costs.
With present value , the future cash flows are discounted by the risk-free rate because the project needs to earn that amount at least; otherwise, it wouldn't be worth pursuing.
U.S. Treasury bonds have risk-free rates as they are guaranteed by the U.S. government, making it as safe as it gets.
In addition, a company might borrow money to finance a project and, as a result, must earn at least enough revenue to cover the financing costs, known as the cost of capital . Publicly traded companies might use a combination of debt—such as bonds or a bank credit facility—and equity, by issuing more shares of stock.
The cost of capital is usually a weighted average of both equity and debt. The goal is to calculate the hurdle rate or the minimum amount that the project needs to earn from its cash inflows to cover the costs. To proceed with a project, the company will want to have a reasonable expectation that its rate of return will exceed the hurdle rate.
Project managers can use the DCF model to decide which of several competing projects is likely to be more profitable and worth pursuing. Projects with the highest NPV should generally rank over others. However, project managers must also consider any risks involved in pursuing one project versus another.
Payback analysis is the simplest form of capital budgeting analysis, but it's also the least accurate. It is still widely used because it's quick and can give managers a " back of the envelope " understanding of the real value of a proposed project.
Payback analysis calculates how long it will take to recoup the costs of an investment. The payback period is identified by dividing the initial investment in the project by the average yearly cash inflow that the project will generate.
For example, if it costs $400,000 for the initial cash outlay, and the project generates $100,000 per year in revenue, it will take four years to recoup the investment.
Payback analysis is usually used when companies have only a limited amount of funds (or liquidity) to invest in a project, and therefore need to know how quickly they can get back their investment.
The project with the shortest payback period would likely be chosen. However, the payback method has some limitations, one of them being that it ignores the opportunity cost.
Also, payback analysis doesn't typically include any cash flows near the end of the project's life. For example, if a project that's being considered involves buying factory equipment, the cash flows or revenue generated from that equipment would be considered but not the equipment's salvage value at the conclusion of the project.
As a result, payback analysis is not considered a true measure of how profitable a project is but instead provides a rough estimate of how quickly an initial investment can be recouped.
Throughput Analysis
Throughput analysis is the most complicated method of capital budgeting analysis, but it's also the most accurate in helping managers decide which projects to pursue. Under this method, the entire company is considered as a single profit-generating system. Throughput is measured as the amount of material passing through that system.
The analysis assumes that nearly all costs are operating expenses, that a company needs to maximize the throughput of the entire system to pay for expenses, and that the way to maximize profits is to maximize the throughput passing through a bottleneck operation.
A bottleneck is the resource in the system that requires the longest time in operations. This means that managers should always place a higher priority on capital budgeting projects that will increase throughput or flow passing through the bottleneck.
What Is the Primary Purpose of Capital Budgeting?
Capital budgeting's main goal is to identify projects that produce cash flows that exceed the cost of the project for a company.
What Is an Example of a Capital Budgeting Decision?
Capital budgeting decisions are often associated with choosing to undertake a new project that will expand a company's current operations. Opening a new store location, for example, would be one such decision for a fast-food chain or clothing retailer.
What Is the Difference Between Capital Budgeting and Working Capital Management?
Working capital management is a company-wide process that evaluates current projects to determine whether they are adding value to the business, while capital budgeting focuses on expanding the current operations or assets of the business.
Capital budgeting is a useful tool that companies can use to decide whether to devote capital to a particular new project or investment. There are several capital budgeting methods that managers can use, ranging from the crude but quick to the more complex and sophisticated.
U.S. Securities and Exchange Commission. " Treasury Securities ."
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Q. Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (150 Words)
- Start with writing about the budget and its constitutional provisions.
- Distinguish between Capital Budget and Revenue Budget.
- Explain the components of both these budgets.
Introduction
According to Article 112 of the Indian Constitution, the Union Budget of a year is referred to as the Annual Financial Statement (AFS). It is a statement of the estimated receipts and expenditure of the Government in a financial year (which begins on 01 April of the current year and ends on 31 March of the following year).
Objectives of Budget:
- Reallocation of resources
- Reducing inequalities in income and wealth
- Contributing to economic growth
- Bringing economic stability
- Managing public enterprises
Components of government budgets:
It includes the Capital Receipts and Capital Expenditure. | It consists of the Revenue Expenditure and Revenue Receipts. |
Capital Receipts indicate the receipts which lead to a decrease in assets or an increase in liabilities of the government. It consists of: (i) the money earned by selling assets (or disinvestment) such as shares of public enterprises, and (ii) the money received in the form of borrowings or repayment of loans by states. | Revenue Receipts are receipts which do not have a direct impact on the assets and liabilities of the government. It consists of the money earned by the government through tax (such as excise duty, income tax) and non-tax sources (such as dividend income, profits, interest receipts). |
Capital Expenditure is used to create assets or to reduce liabilities. It consists of: (i) the long-term investments by the government on creating assets such as roads and hospitals, and (ii) the money given by the government in the form of loans to states or repayment of its borrowings. | Revenue Expenditure is the expenditure by the government which does not impact its assets or liabilities. For example, this includes salaries, interest payments, pension, and administrative expenses. |
It is non-recurring in nature. It is usually a one-time expenditure for a long period of time. | It is recurring in nature (on a yearly basis). |
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Union Budget 2024
Our team of senior tax and policy professionals decodes and analyzes various aspects of budget 2024..
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Budget 2024 : Consolidated tax and policy alert
Budget 2024: sectoral highlights.
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EY Leaders on Budget 2024
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The government efforts reflect a comprehensive strategy to transform agriculture, focusing on climate-resilient practices, boosting productivity, enhancing efficiency. The initiatives aim to equip farmers with the tools needed for sustainable growth in changing climates. The budget also sets its intention on enhancing productivity and marketing in the sector, evident in initiatives focusing on development of clusters across major FPO and consumer centres, push for shrimp breeding and exports.
![essay questions on capital budgeting Amit Vatsyayan](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2023/ey-amit-vatsyayan.png)
Amit Vatsyayan Leader GPS-Agriculture, Livelihood, Social and Skills, EY India
The budget's focus on energy security and climate resilience is commendable. The PM Surya Ghar Muft Bijli Yojana, which aims to install rooftop solar panels on 1 crore homes and provide up to 300 units of free electricity per month, stands out as a significant initiative.
![essay questions on capital budgeting Saunak Saha](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2024/ey-saunak-saha.png)
Saunak Saha Partner, Climate Change and Sustainability Services, EY India – Climate change
Three macro themes are playing out in Consumer and Retail sector:
- Increased consumption push through agriculture reforms, Employment generation push, Urbanisation, controlled inflation and Growth Push
- Abolition of Angel Tax for Startups could benefit digitally first brands, etc.
- Push domestic sourcing through promoting domestic manufacturing through industrial parks, custom duty changes etc.
![essay questions on capital budgeting Alexy Thomas](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2023/ey-paresh-parekh.png)
Paresh Parekh EY India Partner and Tax Leader - Consumer Product and Retail Sector
The Government of India (GoI) has accelerated the process of fiscal consolidation by targeting a reduced fiscal deficit to GDP ratio of 4.9% in 2024-25 as compared to 5.1% provided in the interim budget. Relative to 2023-24, when it was 5.6%, this implies a correction of 0.7% points. An important implication is that GoI’s gross and net market borrowings would be reduced in terms of magnitude which would now amount to INR14.01 lakh crore and INR11.63 lakh crore respectively in 2024-25. This turnaround would facilitate a reduction in policy interest rates and encourage private investment. The emphasis on fiscal consolidation implies reaching the FRBM target of 3% of GDP by 2027-28 with an annual correction of 0.7% points in the next two years followed by 0.5% points in 2027-28. In the medium-term therefore, the private sector would be progressively facilitated to increase its investment demand.
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Dr DK Srivastava Chief Policy Advisor, EY India
The budget announcement on making data and statistics available, will help facilitate access to data, which would also come in handy for AI development. Operationalisation of Rs 100,000 Crore innovation fund would help entrepreneurs and businesses with R&D related investments that may also lead to AI. The Digital Public Infrastructure is proposed for covering sectors like credit, education, healthcare, law and order, etc.
![essay questions on capital budgeting Rajnish Gupta](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2024/ey-rajnish-gupta-v2.jpg)
Rajnish Gupta Partner, Tax and Economic Policy Group, EY India
The Union Budget presents a transformative vision for India's energy sector, emphasizing a robust push towards new energy. While the Finance Minister highlighted the impressive response garnered by rooftop solar plants policy announced as part of interim budget, commitment to research and development of small and modular nuclear reactors underscores the government's foresight in diversifying the energy portfolio and reducing carbon emissions. Effective implementation could position India as a leader in next-generation nuclear technologies, fostering private sector collaborations and boosting high-tech manufacturing.
![essay questions on capital budgeting Raju Kumar](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2024/ey-raju-kumar-v3.png)
Raju Kumar Partner and Energy Tax Leader, EY India
The first budget of the new government has been announced with a focus on employment generation, MSME sector and the Indian middle class. Some of the changes from a direct tax perspective like the removal of angel tax, peak rate of taxation for foreign bank etc. are welcome from a financial services perspective.
![essay questions on capital budgeting Keyur Shah](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2024/ey-keyur-shah_v1.jpg)
Keyur Shah Partner and Leader — Financial Services Tax, EY India
The budget has set a new course for GIFT City IFSC, aligning the tax treatment of Retail Schemes and Exchange Traded Fund (ETFs with Category III IFSC Alternate Investment Funds in India (AIFs), thus will attract global fund managers and boosting the fund management ecosystem. Additionally, IFSC Finance companies now enjoy an exemption from thin capitalisation rules, encouraging the establishment of Finance Companies and treasury units.
Jaiman Patel Tax Partner – Financial Services, EY India
The Union Budget 2024 lays a robust foundation for achieving Viksit Bharat 2047, prioritizing urban development. It emphasizes city-led growth and PM Awas Yojana-Urban 2.0, with a significant focus on affordable housing, allocating Rs 2.2 lakh crore for affordable housing and Rs 10 lakh crore for urban housing.
Adil Zaidi EY Partner & Leader - Economic Development Advisory – Infrastructure
India aims to boost domestic manufacturing by changing import duties in sectors like medical devices, energy, and defense. To create more jobs and support MSMEs manufacturers, the government plans to offer employment incentives and expand credit guarantees.
![essay questions on capital budgeting Alexy Thomas](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2023/ey-saurabh-agarwal.png)
Saurabh Agarwal EY India Tax Partner
The budget has maintained a neutral stance towards the Pharmaceutical and Healthcare sector. Noteworthy advancements include a commitment to enhance R&D, with an emphasis on basic research and the development of prototypes - re-emphasis of commitment made in interim budget.
![essay questions on capital budgeting Alexy Thomas](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2023/ey-hitesh-sharma.png)
Hitesh Sharma Partner and Life Sciences Leader – Tax, EY India
The Finance Minister has in the budget proposals focussed on bolstering macroeconomics and catering to the needs of ‘Garib’ (Poor), ‘Mahilayen’ (Women), ‘Yuva’ (Youth) and ‘Annadata’ (Farmer). Budget presented today proposes simplification of taxes through immediate measures such as overhaul of capital gains tax regime and making new tax regime more attractive as also on long-term tax reforms which involve comprehensive review of the existing Income-tax law, de-criminalization of penalty provisions and reducing tax disputes.
![essay questions on capital budgeting Sonu Iyer](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2024/ey-sonu-iyer-v4.png)
Sonu Iyer Tax Partner and People Advisory Services Leader, EY India
Embracing the Digital India mission's expansive reach and leveraging Digital Public Infrastructure for agricultural reforms, the Government is setting a new benchmark for technological integration in governance. The Union Budget 2024's pledge to digitalize the residual services of Customs and Income Tax epitomizes the 'Viksit Bharat' ethos, paving the way for a frictionless, paperless tax administration in the transformative epoch of 'Amrit Kaal'.
![essay questions on capital budgeting Rahul Patni](https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2024/ey-rahul-patani.png)
Rahul Patni Digital Tax Leader, EY India
Video bytes: EY Leaders on Budget 2024
Budget webcasts.
India Budget Analysis - Japan Desk | 26 July, 10:00 a.m. | Tetsuo Yamaguchi/ Miki S Watanabe | Virtual | |
CII New Delhi – EY event | 26 July, 2:30 p.m. | Ganesh Raj and Uday Pimprikar | Venue: TBD | |
EY and Projects Today webcast: Infrastructure sector | 26 July, 11:00 a.m. | Neetu Vinayek and Uma Iyer | Virtual | |
Impact on Oil and Gas sector | 26 July, 2.30 p.m. | Neetu Vinayek and Uma Iyer | EY Ruby office, Mumbai | |
CII Baroda – EY event | 26 July, 3:00 p.m. | Prashant Maheshwari | Physical session | |
Webcast with Organisation of Pharmaceutical Producers of India (OPPI) | 26 July, 3:00 p.m. | Hitesh Sharma and Ashish Jain | Virtual | |
Webcast with EY US Desk | 31 July, 1:00 p.m. EST | Sameer Gupta, Pranav Sayta and Uday Pimprikar | Virtual |
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Love it or hate it, pickleball is good for our democracy
There’s more to this fitness fad than meets the eye..
By Dallas Morning News Editorial
2:00 AM on Jul 27, 2024 CDT
![essay questions on capital budgeting Megan Dillon swings at the ball during a doubles game of pickleball on Monday, July 15,...](https://dmn-dallas-news-prod.cdn.arcpublishing.com/resizer/v2/GMRKOFML2ZHLFG33QPKLN5KFCQ.jpg?auth=45d778f1eeb1111e857e4202d23915d97573f5643d6c726326c0acee32df1cb8&height=553&width=830&smart=true&quality=40)
There seems to be no middle ground on pickleball. People either love it or they hate it. We’ll leave it to others to debate pickleball’s merits as a sport, but it is good for us as a society. That’s because you can’t play pickleball alone.
Over the years, social scientists have criticized and bemoaned younger generations’ substitution of technology and social media for in-person social interactions. However, the decline in social interaction is older than millennials and Generation Z. People have been talking about the lack of civic engagement in every sphere of life at least as far back as the 1990s, when political scientist Robert Putnam published his essay “Bowling Alone: America’s Declining Social Capital.”
“For a variety of reasons, life is easier in a community blessed with a substantial stock of social capital,” Putnam wrote in his essay.
In layman’s terms, social capital is the process of building the bonds of community and trust through social involvement. And we need more trust if our institutions are going to work.
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Yet nowadays, fewer people know their neighbors . The pandemic made many of us feel lonelier than ever, with more Americans turning to social media to meet friends and find spouses .
While technology and the pandemic accelerated the decline in social capital, not all is lost. Gen Z and millennial Dallasites have shown that they do, in fact, want community and in-person interactions like older generations do. As our colleague Elizabeth Myong recently reported, many of them are making friends or maintaining friendships by playing pickleball.
The game is a mix of tennis, badminton and pingpong. Originally popular among senior residents, pickleball has become a fun outlet for all generations. In Dallas, many people find their friends just by waiting in line for a game.
Playing pickleball can help improve mental and physical health. Outdoor courts expose players to sunshine and Vitamin D. It’s also an activity that gives players a good sweat. And researchers have established that physical activity, especially outside, can reduce anxiety and depression .
Is pickleball a sport or a hobby? To that we say, who cares — so long as you are meeting new people and developing friendships.
In an age of increased loneliness and political polarization, activities like pickleball are essential to a functioning society and democracy. Political affiliation doesn’t matter during a pickleball match. Whether you consider it a hobby or a sport, playing helps people find shared ground and work together as a team. We need these virtues now more than ever.
We welcome your thoughts in a letter to the editor. See the guidelines and submit your letter here . If you have problems with the form, you can submit via email at [email protected]
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Dallas Morning News Editorial . Dallas Morning News editorials are written by the paper's Editorial Board and serve as the voice and view of the paper. The board considers a broad range of topics and is overseen by the Editorial Page Editor.
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Budget 2024 Live Updates: ‘Want to simplify approach to taxation’, says Nirmala Sitharaman on Lower capital gains
Budget 2024 live updates: fm nirmala sitharaman presented the modi 3.0 govt's budget today, introducing increased standard deduction and revised tax rates for salaried individuals under the new tax regime..
![Budget 2024: Finance Minister Nirmala Sitharaman address the media post budget announcement. (PTI) Budget 2024: Finance Minister Nirmala Sitharaman address the media post budget announcement. (PTI)](https://images.livemint.com/img/2024/07/23/600x338/FM_1721729095594_1721729098230.jpg)
Budget 2024 Live Updates: Finance Minister Nirmala Sitharaman presented first budget under Modi 3.0 government on Tuesday, July 23.
Sitharaman introduced increased standard deduction and revised tax rates for salaried individuals under the new tax regime. Besides this, cut on customs duty on gold, silver, mobile phones and other goods were announced.
The Centre's FY25 Capex spend seen at ₹ 11.1 lakh crore — unchanged from Interim Budget, and infrastructure spend at 3.4% of GDP.
Revised tax rate under New Tax Regime as follows:
- ₹ 0-3 lakh - nil tax
- ₹ 3-7 lakh - 5%
- ₹ 7-10 lakh - 10%
- ₹ 10-12 lakh - 15%
- ₹ 12-15 lakh - 20%
- Above ₹ 15 lakh - 30%
Highlights from Budget so far
- Employment and Skilling:
Five schemes to focus on 4.1 crore youth over 5 years with a central outlay of ₹ 2 lakh crore
Comprehensive internship scheme for one crore youth in top companies over five years
Employment-linked incentives, including one month's wage support for first-time employees
Women-specific skilling programs and increased workforce participation
- MSME and Manufacturing Support:
Special attention to MSMEs and manufacturing sector
Credit guarantee scheme and term loans for machinery purchase
Technology support package for MSMEs
SIDBI to open 24 new branches to serve MSME clusters
- Financial Initiatives:
Mudra loan limit increased from ₹ 10 lakh to ₹ 20 lakh for previous borrowers
Financial support for higher education loans up to ₹ 10 lakhs in domestic institutions
Integrated technology system for Insolvency and Bankruptcy Code (IBC)
- Agriculture and Rural Development:
₹ 2.66 lakh crore provision for rural development
Transformation of agricultural research to focus on productivity and climate-resilient crop varieties
Initiative to introduce 1 crore farmers to natural farming over 2 years
- Infrastructure and Regional Development:
Rental housing in PPP mode for industrial workers
Special financial support of ₹ 15,000 crore for Andhra Pradesh
New airports, medical facilities, and sports infrastructure for Bihar
- Economic Outlook:
Inflation moving towards 4% target
India's economic growth described as a "shining exception"
Focus on job creation and boosting consumption, potentially benefiting consumer goods, real estate, and auto sectors
- Nine Priority Areas: Agriculture, Employment, Inclusive Development, Manufacturing and Services, Urban Development, Energy, Infrastructure, Innovation and R&D, and Next Generation Reforms.
- Women-Led Development: Over ₹ 3 lakh crore allocated for schemes benefiting women and girls.
- Social Welfare: Extension of PMGKAY (Pradhan Mantri Garib Kalyan Anna Yojana) for five years, benefiting over 80 crore people
- Digital and Technological Advancements: Development of Digital Public Infrastructure (DPI) applications for credit, e-commerce, law and justice, and corporate governance
Read the latest news on Budget 2024 with our live coverage on the Income Tax Slab , Impact on Share Market, Budget Key Highlights, Corporate Reactions.
Budget 2024 Live: Sanjeev Krishan, Chairperson, PwC in India.
Budget 2024 Live: “The budget highlights India's next leap forward – empowering the very nucleus of the nation – Indian citizens. Right from driving the participation of women in the workforce to enhancing the employability of the youth across the nation, the focus on building a future-ready workforce is evident. With the right incentives and fiscal support, the Government has paved a clear path towards a Viksit Bharat – bringing together the power of the private and public sector, and reinforcing this with our distinctive demographic advantage."
Budget 2024 Live: Srini Chinamilli Co-founder and CEO Tessolve, said,
Budget 2024 Live: "This year's budget is forward-looking and aimed at making India self-reliant while equipping our youth with the skills necessary for employment. The government has announced various plans to tailor courses in collaboration with industry, fostering strong industry-academia partnerships to enhance skill development. Its plan for freshers and internships will also help the new and potential employees. Tessolve is proud to have contributed to upskilling individuals over the past few years. With the government support, this effort will further boost emerging sectors like semiconductors, addressing the skill gap effectively.
Additionally, investments in research, including funding for the Anusandhan National Research Foundation, will significantly boost advancements in cutting-edge technologies. Through these steady and strategic investments, we are paving the way for India to emerge as a global superpower."
Budget 2024 Live: Divyesh Dalal, Managing Director & Head – Global Transaction Services, SME & Institutional Liability Business, DBS Bank India, said
Budget 2024 Live: “The measures announced in the Union Budget underscore the government's commitment to empowering MSMEs, the backbone of our economy. The introduction of the credit guarantee scheme is an encouraging step towards making capital more accessible. Additionally, the provision of collateral-free term loans for purchasing machinery and equipment will tangibly enhance the operational capabilities of MSMEs by enabling technology upgrades.
Further, lowering the turnover thresholds mandatory for onboarding on the TReDS platform will allow more MSMEs to access the benefits of this system. The establishment of e-commerce export hubs is poised to further equip enterprises with the tools and support needed to expand into international markets. By making their products more accessible globally through e-commerce platforms, Indian businesses can tap into new opportunities with offshore customers across markets. DBS Bank India is well-positioned to support MSMEs given the focus on supporting the sector."
Budget 2024 Live: Here's what CEA V Anantha Nageswaran said on Union Budget 2024
Budget 2024 Live: “The three schemes that the budget announced with respect to the job creation cover many angles and it will have a huge impact on both the employment market and also on household income growth and consumption, spending powers etc."
Budget 2024 Live: Sanjay Tolia, Partner - Price Waterhouse & Co LLP, said
Budget 2024 Live: “The FM’s budget today is a clear mandate for speed and continuity in achieving the goal of Viksit Bharat by 2047. The fiscal deficit target of 4.5% by FY26 while balancing large capex such as INR 11 lakh crore on infra – which has a multiplier effect on economic growth and employment creation – is a step in the right direction. With a clear focus on manufacturing and services, the government has committed to tapping India’s youthful workforce with an allocation of INR 2 lakh crore over the five years which will be leveraged by the growing number of GCCs in India and the new manufacturing units being added under the Make in India drive. This, coupled with special attention to MSMEs and setting up of plug-and-play industrial parks in over 100 cities, sets a clear path for sustainable growth."
Budget 2024 Live: Fin Min dismisses opposition's claims of bias in Budget 2024
Budget 2024 Live: Finance Minister Nirmala Sitharaman dismissed the Opposition's claims of bias in the budget towards states run by supporting parties. She asserted that those whose alliance garnered less than 230 seats have no grounds for criticism, emphasizing that the Centre has allocated funds to all states. Addressing the ₹ 60,000 crore projects for Bihar and the pledge for multilateral assistance for Bihar and Andhra Pradesh, she highlighted that the budget includes ₹ 1.5 lakh crore in assistance for all states.
Budget 2024 Live: The decision to remove angel tax will help startups to secure funding easily: The Detailing Mafia CEO
Budget 2024 Live: “The budget aims to revitalize the startup ecosystem and manufacturing sector altogether. The decision to remove angel tax is a major relaxation, which will boost the confidence of the startups. Also, the initiatives to boost manufacturing jobs, employments, skilling the youth and women will create a pool of skilled workers with disposable income & potentially drive growth in the industry. This two-pronged approach could propel India's startup ecosystem and manufacturing base forward," said Mr. Kunal Sethi, CEO of The Detailing Mafia.
Budget 2024 Live: Govt allocates ₹3 lakh crore to women and girls
Budget 2024 Live: To promote women-led development, Finance Minister Nirmala Sitharaman announced on Tuesday that the budget includes an allocation of over ₹ 3 lakh crore for programs benefiting women and girls. While presenting the Union Budget for 2024-25 in the Lok Sabha, Sitharaman emphasized that this allocation reflects the government's commitment to enhancing the role of women in economic development.
Budget 2024 Live: Custom duty cut on gold and silver to help in coping smuggling, says Piyush Goyal
Budget 2024 Live: The Budget's announcement to cut import duty on gold will enhance domestic manufacturing and promote jewelry exports, Commerce and Industry Minister Piyush Goyal said on Tuesday. He also mentioned that removing the angel tax will further bolster the startup ecosystem in the country. Additionally, he noted that with high gold prices and the upcoming marriage season, this measure will benefit the people.
Budget 2024 Live: Reactions - Rikant Pittie, Co-Founder EaseMyTrip on tourism initiatives
Budget 2024 Live: "The government’s attempt in positioning India as the global tourist destination is evident in the Union Budget 2024-25. Demonstrating efforts to promote religious tourism and domestic tourism infrastructure. With special focus on Bihar, Nalanda, and Odisha, the government plans to develop the iconic religious sites to support its infrastructure and transform them into world class pilgrim and tourist destinations. We are optimistic that this will enhance the overall experience of the tourists visiting these religious sites and will uplift the state tourism."
Budget 2024 Live: Tapan Ray, MD and Group CEO, GIFT City, on the Union Budget 2024, said
Budget 2024 Live: "The Union Budget 2024 brings significant developments for GIFT IFSC. The announcement of a tax-efficient regime for retail funds and ETFs will create new business opportunities for asset management companies in GIFT City. This move is expected to attract investments from NRIs and foreign retail investors into India. We thank the Union government for its continued support in helping GIFT City become a truly vibrant global financial centre."
Budget 2024 Live: Rajesh Sinha Sr. Research Analyst at Bonanza Portfolio, said
Budget 2024 Live: "Finance Minister Nirmala Sitharaman has presented the Budget today. The FM has hiked STCG tax to 20% and LTCG raised from 10% to 12.5%. STT on Future and Option hiked to 0.02% and 0.1% as well as income from buyback to be taxes. The budget has also emphasized on Infrastructure. FM has announced new airports, medical facilities and sports infra for Bihar and Rs. 26,000Cr to be allocated to highways in Bihar. Budget also announce scheme to promote water supply, sewage treatment and solid waste management projects and services for 100 large cities. Rs. 2.66 Lakh Crore has been allocated towards Rural development and rural infrastructure whereas allocated of Rs. 10Lakh Crore for 1 crore houses for urban poor.
FM also announced 3 schemes for Employment Linked Incentive to boost employment and skill development, which includes 1 month wage to new entrants in all formal sectors in 3 instalments up to Rs.15,000, incentive to both employee and employer for EPFO contributions in the specified scales for the first 4 years.
FM also emphasized on non-renewable and renewable energy development.
FM announced a 2400MW power plant setup in Bihar at cost of Rs. 21400Cr. She also announced a joint venture between NTPC and BHEL will set up a full scale 800 MW commercial plant."
Budget 2024 Live: Ashishkumar Chauhan, MD and CEO at National Stock Exchange (NSE) said on the Union Budget 2024 under the Modi 3.0 government
Budget 2024 Live: “The budget for the financial year 2024-25 presented by Hon’ble Finance Minister Smt. Nirmala Sitharaman has given a huge fillip to job creation in India by ensuring that the private sector also participates in job creation in addition to the government sector while ensuring that India becomes the number 1 start up nation and a nation of entrepreneurs by providing relief on the angel tax as well as increasing Mudra loan scheme limit from ₹ 10 lakhs to ₹ 20 lakhs per person. She has also focused on increasing women participation in India’s labour force which will help India reap demographic dividend even further by increasing young women’s participation in the workforce. Skill development as a part of job creation has been also an out of the box idea from her while keeping infrastructure outlay intact and reducing fiscal deficit at 4.9% from the expectation of 5.1%. All these things are being achieved without much tinkering with the direct or indirect tax structure ensuring that India’s long term credit rating improves by giving a glide path to 4.5% fiscal deficit in 2025-26. Overall, 10/10."
Budget 2024 Live: Union Budget 2024 allocates ₹1.28 lakh crore to telecom ministry
Budget 2024 Live: The government has proposed an allocation of ₹ 1.28 lakh crore for telecom projects and public sector companies under the telecom ministry, with the majority of the funds designated for state-owned BSNL. Over ₹ 1 lakh crore of the total proposed allocation is intended for BSNL and MTNL-related expenses, including ₹ 82,916 crore for technology upgrades and restructuring at BSNL.
Budget 2024 Live: Naidu thanks FM Sitharaman for Andhra share in Budget
Budget 2024 Live: “On behalf of the people of Andhra Pradesh, I thank the Hon'ble Prime Minister, @narendramodi Ji and Hon'ble Union Finance Minister, @nsitharaman Ji, for recognising the needs of our State and focusing on a Capital, Polavaram, industrial nodes and development of backward areas in AP in the union budget of FY 24-25. This support from the Centre will go a long way towards rebuilding Andhra Pradesh. I congratulate you on the presentation of this progressive and confidence-boosting budget," N Chandrababu Naidu, said in a post on social media platform X.
Budget 2024 Live: Sitharaman on long-term capital gains
Budget 2024 Live: "We wanted to simplify the approach to taxation - also for the capital gains. Second, if anything, the average taxation has actually come down when we say it is 12.5%. We have worked out for each of the different asset classes...The point that we brought it down from below the average to 12.5% encourages investment in the markets..."
Budget 2024 Live: Reactions - Mr. DS Negi, CEO, Rajiv Gandhi Cancer Institute & Research Centre (RGCIRC) on customs waiver for 3 cancer medicines, x-ray machine parts
Budget 2024 Live: "We applaud the government's decision in the Budget 2024-25 to completely waive customs duties on three more cancer medicines. This move is a crucial step in ensuring that medications for cancer become more affordable for patients across the country. The high cost of cancer medications has been a major barrier for many patients, and this exemption will undoubtedly provide much-needed financial relief to those battling the disease.
Moreover, the proposed reduction in the basic custom duty (BCD) on x-ray tubes and flat panel detectors for use in medical x-ray machines are commendable. By aligning these changes with domestic capacity addition, the government is not only supporting the growth of local manufacturing but also ensuring that advanced medical technology is available to improve diagnostic accuracy and treatment outcomes for cancer patients. We applaud the government for these decisive measures and are confident that they will bring us closer to a future where every cancer patient has access to the best possible care."
Budget 2024 Live: FM talks about investment issues from China
Budget 2024 Live: Sitharaman addressed the issue of investments from China, noting that the Economic Survey offered its perspective on the matter. She explained that, similar to investments from other neighboring countries, these investments are subject to a review process. Although the survey indicated it might be time to open up, she emphasized that this suggestion is still being considered cautiously and clarified that she is not dismissing it.
Budget 2024 Live: FM on old tax regime
Budget 2024 Live: The Finance Minister stated that she cannot decide whether the old tax regime will be eliminated but emphasized that the goal is to simplify the tax system.
Budget 2024 Live: Angel tax introduced in UPA-II, says FM
Budget 2024 Live: The Finance Ministry commented on the abolition of the Angel Tax, acknowledging that although it was effective in preventing money laundering, it also inadvertently hindered investment in India.
Budget 2024 Live: FM on Angel Tax abolition
Budget 2024 live: fm on lower capital gains tax.
Budget 2024 Live: Lower capital gains tax to encourage investment, says Nirmala Sitharaman
Budget 2024 Live: Nirmala Sitharaman briefs media post budget announcement
Budget 2024 Live: Finance Minister Nirmala Sitharaman briefs media after the announcement of Union Budget 2024.
Budget 2024 Live: Reactions - Shyam Manohar Nayak, Chairman, Sunlit Power on energy sector
Budget 2024 Live: "As someone deeply involved in the energy sector, I'm genuinely excited about the budget's focus on power and renewables. The plan for a new 2400 MW power plant is a game-changer for our energy landscape. But what really warms my heart is the overwhelming response to the PM Surya Ghar Muft Bijli Yojana - it's not just a scheme, it's a solar revolution in the making! The upcoming pumped storage policy is like music to our ears at Arenq. It's not just about generating power, but storing it smartly too. And let's not forget the roadmap for hard-to-abate industries - it's a bold step towards a greener future. This budget isn't just numbers on paper. It's about lighting up homes, powering industries, and paving the way for a sustainable India. At Arenq, we're thrilled to be part of this electrifying journey!"
Budget 2024 Live: PM Modi on new opportunities for startups and space economy
Budget 2024 Live: Prime Minister Narendra Modi says "For MSMEs, a new scheme to increase ease of credit has been announced in the budget. Announcements have been made to take export and manufacturing ecosystem to every district in this budget...This budget will bring new opportunities for startups and the space economy..."
Budget 2024 Live: 'Provisions to make Defence self-reliant, tourism in focus, tax & TDS simplified... we are speeding development,' says PM Modi
Budget 2024 Live: "Today, Defence exports are at a record high. Many provisions have been made in this Budget to make the defence sector self-reliant. Focus also laid on the tourism sector in this Budget...A decision has also been taken on the reduction of tax and TDS rules are also simplified...We are speeding development in the eastern region by the way of construction of highways and water and power projects..."
Budget 2024 Live: 'Will make India a global manufacturing hub,' says PM Modi
Budget 2024 Live: Prime Minister Narendra Modi says "We will together make India a global manufacturing hub. The MSME sector of the country is connected to the middle class. The ownership of the MSME sector is with the middle class. This sector provides maximum employment to the poor..."
Budget 2024 Live: 'This budget will empower new middle class, women, MSMEs...' says PM Modi
Budget 2024 Live: "In the last 10 years, 25 crore people have come out of poverty. This budget is for the empowerment of the new middle class. The youth will get unlimited opportunities from this budget. Education and skill will get a new scale from this budget. This budget will give power to the new middle class...This budget will help women, small businessmen, MSMEs..."
Budget 2024 Live: 'This budget empowers every section of society,' says PM Modi
Budget 2024 Live: Prime Minister Narendra Modi says this budget empowers every section of society, PTI reported. This budget puts emphasis on manufacturing as well as infrastructure; will speed up growth: PM Modi. Cites budget's stress on youth, says its measures will open many new opportunities for youngsters.
Budget 2024 Live: Budget focuses on infrastructure, manufacturing sectors: PM Modi
Budget 2024 Live: The Union Budget 2024 focuses on infrastructure and manufacturing sectors, will speed up the growth, said PM Modi.
Budget 2024 Live: Budget empowers new middle class, says PM Modi
Budget 2024 Live: "In the last 10 years, 25 crore people have come out of poverty. This budget is for the empowerment of the new middle class. The youth will get unlimited opportunities from this budget. Education and skill will get a new scale from this budget. This budget will give power to the new middle class...This budget will help women, small businessmen, MSMEs..." PM Modi said.
Budget 2024 Live: PM Modi addresses the nation post budget announcement
Budget 2024 Live: PM Narendra Modi starts addressing the nation post Union Budget announcement by FM Nirmala Sitharaman.
Budget 2024 Live: Reactions - Abhishek Gupta, Founder and Managing Partner at Pierag Consulting LLP
Budget 2024 Live: "As a consulting firm, we recognize the transformative potential of this scheme. Our experience shows that access to finance is a critical barrier for many MSMEs looking to scale their operations and modernize their production processes. This initiative not only alleviates financial constraints but also encourages technological advancements and productivity improvements within the sector.
We advise MSMEs to leverage this opportunity to invest in state-of-the-art machinery and equipment, which can lead to enhanced operational efficiency and better market positioning.
Overall, this credit guarantee scheme is a promising development for the MSME sector, and we look forward to witnessing its positive impact on the growth and sustainability of businesses across the country."
Budget 2024 Live: Reaction - Anand Ramanathan, Partner and Consumer, Products & Retail Leader, Deloitte India
Budget 2024 Live: "The budget focuses on important areas such as Crop resistant seed variety distribution, scaling digital public infrastructure and natural farming which will improve farm level productivity. Mission for self sufficiency in pulses, encouraging shrimp production and focus on vegetable production clusters will help in aligning production to emerging changes in consumption of fresh produce and proteins."
Budget 2024 Live: ICRA Budget Views
Budget 2024 Live: Here are ICRA views on the Union Budget 2024-25 -
- Focus on digitisation in the Financial as well as Agricultural sector is a positive for data consumption of telecom service providers
- Support for MSMEs via credit guarantee schemes to support the auto ancillary industry.
- Increase in MUDRA loan limit for borrowers with the repayment track record to improve fund flow to the MSME sector.
- Reduction in turnover threshold from Rs. 500 crores to Rs. 250 crores of buyers under Treds platform to enhance financing availability and reduce the overall cost of funds for auto ancillaries.
- The development of industrial parks is a positive for the road logistics sector as a whole.
- Shipping industry to be provided several incentives on ownership leasing and flagging reforms positive for the sector.
- Critical mineral mission for domestic production, recycling and overseas acquisition of critical mineral assets could support EV battery localisation
Budget 2024 Live: Reaction - Aarti Harbhajanka, Managing Director, Primus Partners on real estate
Budget 2024 Live: ‘Cities are Engine of growth, contributing to more than 60% of GDP. It's encouraging to see that urban development has been recognized as one of the key pillars of Viksit Bharat. The government's initiative to establish working women hostels in partnership with industry across the country is commendable. This could potentially provide a significant boost to the Institutional Rental Players in co-living and co-housing space. Government should also consider establishing a Strong Rental Regulatory Framework in the country."
Budget 2024 Live: Reaction - Moin Ladha, Partner at Khaitan & Co
Budget 2024 Live:"Start up if incentivised well will be able to improve the distribution/funding and profitability for agricultural produce. This being one of the key focus areas in this budget.
Special incentives for manufacturing sector which is anyways labour intensive will make the sector more attractive for foreign direct investment and will fosters growth of this sector. However this being limited to first time employees will create a challenge regarding the ability of such employees to be involved in skilled jobs as there would be limited practical experience.
This could therefore limit the impact of these incentives."
Budget 2024 Live: Reactions to allocations announced by FM Sitharaman
- Bhaskar Majumdar, Managing Partner, Unicorn India Ventures: “This is recognition of the growing need for a deeptech economy. However, alongside the R&D Fund, the government should look at the Intellectual Property regime. The much overdue Patent Policy needs to come out soonest to enable maximisation of R&D Fund."
- Anil Joshi, Managing Partner, Unicorn India Ventures: “The 1,000 crore fund of funds for space tech is testimonial to India’s capability in coming up with breakthrough solutions at low cost. This will certainly help space tech companies to look for much needed early stage capital to get started. This will certainly help mobilise over ₹ 4,000 crore."
Budget 2024 Live: Defense outlay at ₹4.56 lakh crore
Budget 2024 Live: The defense budget has been set at ₹ 4.56 lakh crore, slightly up from the previous allocation of ₹ 4.55 lakh crore.
Budget 2024 Live: Krishnendu Chatterjee, VP and Business Head at TeamLease Services
Budget 2024 Live: "The government's commitment to employment and employability is clear with a ₹ 1.48 lakh crore provision. This initiative, based on EPFO enrollment, focuses on recognizing first-time employees and includes direct benefit transfers of the first month's salary in three installments for salaries up to ₹ 1 lakh. Special emphasis is placed on the industrial and manufacturing sectors. Additionally, employers will receive incentives for job creation, with the government reimbursing up to ₹ 3,000 per month for two years towards EPFO contributions for each new employee."
Budget 2024 Live: Reactions - Ankit Aggarwal, Founder & CEO, Unstop
Budget 2024 Live: “I am glad to see Budget 2024's focus on youth employment and skilling. The ₹ 2 lakh crore allocation for employment schemes is the beginning to a brighter future. The incentives for job creation and the plan to skill 20 lakh youth over five years is what we needed. The support for higher education loans and the push for women in the workforce is also a big plus. It feels good to see the government recognising the need to focus on key areas that can make our journey towards a skill based economy smoother."
Budget 2024 Live: Standard deduction increased to ₹75,000 in new tax regime
Budget 2024 Live: Standard deduction is increased to ₹ 75,000 from ₹ 50,000 in new tax regime.
Budget 2024 Live: Revised tax rate under New Tax Regime
Budget 2024 Live:Revised tax rate under New Tax Regime as follows:
Budget 2024 Live: FM on customs duty
- Union Finance Minister Nirmala Sitharaman says "A comprehensive review of the customs duty structure over the next 6 months. TDS rate on e-commerce to be reduced to 0.1%. I propose that two tax exemption regimes for charities merge into one. I propose to decriminalize TDS delay up to the filing of tax date..."
- "25 critical minerals to be exempted from customs duties & BCD on two of them to be reduced, says FM Sitharaman.
Budget 2024 Live: Custom duty cut on silver and gold
Budget 2024 Live: Finance Minister announced a cut in custom duty on gold and silver from 10% to 6%. On precious metals, FM Sitharaman says, "I propose to reduce customs duties on gold and silver to 6% and 6.5% on platinum."
Budget 2024 Live: Angel tax abolished for all taxpayers
Budget 2024 Live: Finance Minister Nirmala Sitharaman has announced the cancellation of Angel tax across all categories of taxpayers
Budget 2024 Live: Fiscal deficit estimated at 4.9% of GDP
Budget 2024 Live: The fiscal deficit estimate for FY25 is 4.9% of the gross domestic product (GDP), as compared to 4.5% in FY24.
Budget 2024 Live: FM Sitharaman on customs duty
Budget 2024 Live: On mobile phone industry, FM Sitharaman says, "I propose to reduce the BCD on mobile phones and mobile PCBS and mobile chargers to 15%."
Budget 2024 Live: Space economy also in focus
Budget 2024 Live: Fin Min also added that there will be continued focus on the expansion of space economy by five times over the span of 10 years. She further went on saying that a venture capital fund of ₹ 1,000 crore will be established to support the goal.
Budget 2024 Live: To provide financial support for flood management
Budget 2024 Live: The Finance Minister acknowledged that Bihar has often been affected by floods and noted the lack of progress on plans to build flood control structures in Nepal. The government will allocate financial support estimated at ₹ 11,500 crore. Assam, which faces annual floods, will receive aid for flood management and related projects. Himachal Pradesh, having experienced extensive flood damage, will get support for reconstruction through multilateral assistance. Additionally, Uttarakhand, which has suffered significant damage from landslides and cloudbursts, will be provided with necessary aid.
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The 60 important capital budgeting questions and answers are as follows: Question 01: What is capital budgeting? Answer: Capital budgeting is the process of finding, analyzing, and choosing investment projects with returns that are expected to last longer than one year.
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Grandeur Industries is currently in the process of reviewing capital budget submissions from its various divisions. Grandeur uses the Capital Asset Pricing Model (CAPM) for a variety of purposes, including the determination of benchmark investment returns. The company's overall cost of capital is 16% and its beta value is 1.2.
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Introduction Capital budgeting is the process assumed by a firm to make long-term decisions, which have a direct effect on the investment of the company or business for that matter. It determines whether an organization's long-term objectives are worth pursuing and budgets on the substantial capital investment of a business and the expenditures. Get a custom essay on Capital Budgeting ...
What is Capital budgeting? As part of the planning and control process, a capital budget is a central tool with which management establishes the optimal allocation of financial resources. In short, it is a matter of evaluating alternative investment projects to achieve profit levels consistent with the assumed risk profile. It is evident that capital budgeting decisions represent one of the ...
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Capital Budgeting essay Capital budgeting comprises an integral part of the effective business development because companies have to focus on the most prospective and profitable projects with the balanced risk-returns ratio. Capital budgeting is the process, which determines whether the particular project is worth pursuing. Investing too much into capital budgeting leads to the narrow ...
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Capital Budgeting Introduction Capital budgeting is the process of evaluating and selecting long-term investments that are consistent with the firm's goal of maximizing owner wealth. A firm using capital budgeting, their goal is to see if there fixed income will cover itself for profit. Fixed incomes are things such as land, plant and equipment ...
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NPV and IRR are the most recurrently used capital budgeting practice, judging by the retorts of the interviewees.
Question 1Describe the capital asset pricing model (CAPM) and how it is used in capital budgeting decisions.Your response should be at least 200 words in length. Question 2You win the $20 million state lottery, and you have a choice of taking an amount of money per year for the next 20 years or a flat
Capital Budgeting Analysis of an Ice Cream Store Acquisition for Mr. Specter-A Grocery Store Owner. Introduction Background of information Mr. Specter is an experienced grocery store owner based in Vancouver, British Columbia, who has built a successful business over the past 35 years; he has an established brand and loyal customer base across ...
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Free Essay: Question a What is capital budgeting? Are there any similarities between a firm's capital budgeting decisions and an individual's investment...
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Capital Expenditure is used to create assets or to reduce liabilities. It consists of: (i) the long-term investments by the government on creating assets such as roads and hospitals, and. (ii) the money given by the government in the form of loans to states or repayment of its borrowings. Revenue Expenditure is the expenditure by the government ...
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Budget 2024 Live Updates: FM Nirmala Sitharaman presented the Modi 3.0 govt's Budget today, introducing increased standard deduction and revised tax rates for salaried individuals under the new ...