For businesses to continuously sustain in the competitive market, they need to expand their operations to relevant new dimensions. For this, they have to go for expansion, replacement and renewal of their capital assets. With regards to these situations, organizations need to deploy long term capital, and they have to decide in which of the alternatives they should fund. This scenario initiates the concept of capital budgeting.

Required

1. Outline three (3) advantages and three (3) disadvantages of capital budgeting.
2. There are a number of capital budgeting techniques available. List four of the methods used
3. How are project classifications used in the capital budgeting process?
4. The need for capital investment is very indispensable, since organizations incur expenditure for acquiring or improving the fixed assets, and the benefits of which are expected to be received over a number of years in future. What are the factors that give rise to the need for capital investments?

e). Define payback method of investment evaluation.