Capital Budgeting

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LIST OF CONTENTS

DECLARATION 2
ACKNOWLEDGEMENT 3
LIST OF CONTENTS 4
INTRODUCTION TO CAPITAL BUDGETING 5
CAPITAL BUDGETING PROCESS 7
ORGANIZING CAPITAL BUDGETING PROCESS IN LARGE FIRMS 8
CAPITAL BUDGETING DECISION RULES 9
CAPITAL BUDGETING: EMERGING ISSUES AND TRENDS 12
CRITIQUE 13
CONCLUSION 15
BIBLIOGRAPHY 16

Introduction to Capital Budgeting
Indian economy as a whole has largely been insulated against the global economic slowdown, the Indian real estate sector though has been seriously affected keeping in sync with the global real estate fortunes (Economic Times, 16th June’09), nevertheless in the hotel industry there are expansions, acquisitions and exceptionally diverse structures are coming up in different markets to attain incredible growth in the business.
The union budget 2009-2010 had a lot in store for the hotel industry in specific by the abolition of the fringe benefit tax in attracting and retaining the employees. Other benefits being the development of rail, road and airports through the India Infrastructure Finance Company Ltd. and the increased budget for the commonwealth 2010 (Krupa Vohra, Travel Professional).
The Indian hospitality industry of which hotels form a part is valued at $23 billion and comprise of 75% total market size. The hotel market is expected to double by the year 2018 and about $12 billion is likely to be invested in the next two years and by 2011 there will be round 40 new international hotel brands operating in India as expressed by the Technopak Advisors, New Delhi through the Business Standard.
When a business makes a capital investment it incurs cash expenditure in the expectation of future benefits, usually these benefits extend beyond 1 year in the future. An investment proposal should be judged in relation to whether or not it provides a return equal to or greater than required by the investors. The process of identifying, analyzing and selecting investment projects whose returns (cash flows) are



Bibliography: Steed E., ‘Hotel Management company forecasting and budgeting processes: a survey based analysis’ Dayanand, D., et al, (2002), ‘Capital Budgeting: Financial Appraisal of Investment Projects’, Cambridge University Press. Fahey, L., & King, W. (1977). ‘Environmental scanning in corporate planning. Business Horizons’ .

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