Question

What is the last step of the capital budgeting process and why is it important?

Answer 1

Capital Budgeting is a multi-step process to determine that how worthwile a project or investment will be. The capital Budgeting process consists of 5 steps which starts with identifying the opportunities and ends with its Implementation.

During this final step of IMPLEMENTATION the company finally decides after all the calculation and evaluations about the viability of the project. It may decides to:-

• Abandon the project or investment- If it decides to abandon then all the costs incurred will be known as sunk costs, and no further process will be there.(means implementation stage no required)
• Move forward with the project or investment- If it decided this then it will require the final stage of making an implementation plan. The plan should include a means of paying for the project at hand, a method for tracking costs, and a process for recording cash flows or benefits the project generates. The implementation plan should also include a timeline with key project milestones, including an end date if applicable.