CAPITAL BUDGETINGis the process that companies use for decision making on capital projectsthose projects with a life of a year or more. This is a fundamental area of knowledge in finance for a number of reasons:

• Capital budgeting is very important for corporations. Good capital projects can significantly increase the value of the company, whereas bad ones can hurt it. Capital projects, which make up the long-term asset portion of the balance sheet, can be so large that sound capital budgeting decisions ultimately decide the future of many corporations.
• Capital decisions cannot be reversed at a low cost, which makes mistakes very costly.
• The principles of capital budgeting have been adapted for many other corporate decisions, such as investments in working capital, leasing, mergers and acquisitions, etc.

In this discussion, I ask you to give 2 examples of capital budgeting decisionsmade bythe same company. One that turned out to be a good decision (success story), and another one that turned out to be a bad decision ex post (failure story).

Let me start!

The Amazon Kindle - a success story that made Amazon the undisputed leader in e-readers.

The Fire Phone - Amazon's $170 million fiasco is an example of a capital budgeting project that failed to take off.