Example of Capital Budgeting

Example of Capital Budgeting is that capitals budgeting for a dairy farm growth occupy three steps: recording the savings cost, projecting the savings cash flows and measure up to the projected salary with increase rates and the time value of the savings. For example, dairy equipment that costs $10,000 and produce a $4,000 annual return would come into view to “pay back” on the savings in 2.5 years. On the other hand, if economists look forward to increase to rise 30 percent annually, then the predictable return value at the end of the first year ($14,000) is actually worth $10,769 when you account for increase ($14,000 divided by 1.3 equals $10,769). The savings produces only $769 in an exact value after the first year.