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408 Corporate Finance BRILLIANT’S

stance, a firm may be considering proposal to _erZm| _| go {H$gr EH$ _erZ H$mo bJmZo Ho$ àñVmd na {dMma
install a semi-automatic or highly automatic H$a ahr h¡ Am¡a `{X \$_© go_r-Am°Q>mo_o{Q>H$ _erZ bJmZo H$m
machine. If the firm installs a semi-automatic
machine it excludes the acceptance of proposal {ZU©` bo Vmo Am°Q>mo_o{Q>H$ _erZ H$m àñVmd ñdV… hr {ZañV
to install highly automatic machine. hmo Om`oJmŸ&
2. Accept-reject Decisions: The accept-re- 2. ñdrH¥${V-AñdrH¥${V Ho$ {ZU©`… ñdrH¥${V-
ject decisions occur when proposals are inde- AñdrH¥${V Ho$ {ZU©` do hmoVo h¢ {OZ_| Xmo `m Xmo go A{YH$
pendent and do not compete with each other. àñVmdm| _| Amng _| H$moB© à{V`mo{JVm Z hmoŸ& \$_©, BÝdoñQ>_|Q>
The firm may accept or reject a proposal on the na {_{Z__ [aQ>Z© Ho$ AmYma na {H$gr àñVmd H$mo ñdrH¥$V
basis of a minimum return on the required `m AñdrH¥$V H$a gH$Vr h¡& CZ g^r àñVmdm| H$mo ñdrH¥$V
investment. All those proposals which give a {H$`m OmVm h¡ Omo Hw$N> dm§{N>V g^r [aQ>Z© go A{YH$ [aQ>Z©
higher return than certain desired rate of re- àXmZ H$aVo h¢ VWm AÝ` g^r àñVmdm| H$mo AñdrH¥$V H$a
turn are accepted and the rest are rejected. {X`m OmVm h¡Ÿ&
3. Contingent Decisions: The contingent 3. AmH$pñ‘H$ {ZU©`… nam{lV {ZU©` do hmoVo h¢ Omo
decisions are dependable proposals. The in- Xygao {ZU©` na {Z^©a hmoVo h¢Ÿ& `{X {H$gr EH$ àñVmd H$mo
vestment in one proposal requires investment ñdrH¥$V H$aHo$ Cg_| BÝdoñQ>_|Q> {H$`m OmE Vmo Cggo g§~§{YV
in one or more other proposals. For example, AÝ` àñVmdm| H$mo ^r ñdrH¥$V H$aZm Amdí`H$ hmoVm h¡Ÿ&
if a company accepts a proposal to set up a CXmhaU Ho$ {b`o, `{X H$moB© H$ånZr {H$gr [a_moQ> E[a`m _|
factory in remote area it may have to invest in \¡$ŠQ>ar H$s ñWmnZm H$m àñVmd ñdrH¥$V H$aVr h¡ Vmo Cgo
infrastructure also e.g. building of roads, AÝ` Amdí`H$ gw{dYmAm| na ^r ì`` H$aZm hmoJm O¡go
houses for employees etc. g‹S>H$, H$_©Mm[a`m| Ho$ {b`o ŠdmQ©>g© H$m {Z_m©U H$aZm Am{X&
PROCESS OF CAPITAL BUDGETING/ H¡${nQ>b ~OqQ>J H$s à{H«$¶m

Q.46. Explain the important steps in Capital Budgeting Process.
H¡${nQ>b ~OqQ>J à{H«$¶m H$s ‘hËdnyU© ñQ>oßg g‘PmBE&

Process of Capital Budgeting H¡${nQ>c ~OqQ>J H$s àmogog

Generally, the process of capital budgeting H¡${nQ>c ~OqQ>J H$s àmogog _| gm_mÝ`V… {ZåZ ñQ>oßg
involves following steps: hmoVo h¢…
1. Project generation: The generation of the 1. àmoOoŠQ> H$m àma§^… àmoOoŠQ> H$m àma§^ {ZåZ _| go
project may fall under any of the following {H$gr EH$ loUr _| Am gH$Vm h¡…
categories:
(a) Additions to the present product line. (a) dV©_mZ àmoS>ŠQ> cmBZ _| Z`m em{_c H$aZmŸ&
(b) Expand the capacity of the existing product (b) {dÚ_mZ àmoS>ŠQ> cmBZ H$s j_Vm _| {dñVma H$aZmŸ&
line.
(c) Proposals to reduce costs of the existing (c) Am°naoeÝg H$s ñHo$c H$mo à^m{dV {H$E {~Zm dV©_mZ
product line without affecting the scale of àmoS>ŠQ> cmBZ H$s H$m°ñQ> H$_ H$aZo H$m àñVmdŸ&
operations.