Corporate Finance: Capital budgeting

A capital budgeting process is a tool that companies use to compare the relative merits of different long-term investment options.

That process involves estimating the future cash flows associated with each option and then discounting those cash flows back to the present value.

The option with the highest present value is typically considered the best option from a financial perspective.

The capital budgeting process is important because it allows companies to make informed decisions about where to allocate limited…