capital budgets

4-1 Discussion: Capital Budgets
Name
Institution

4-1 Discussion: Capital Budgets
According to Contino (2001), the process of following step after every step which the businesses normally use in determining the advantages of the investment project is known as the capital budgeting. The various decisions regarding on whether to deny or accept the investment project like the company’s part of the growth in its initiatives that involves the determination of return’s rate of the investment that similar projects are capable of generating. Nevertheless, the capital budgeting is much vital because it is through it that measurability and accountability are created as pinpointed by Taggart (2014). The investment returns and the cost of capital’s relationship exist mainly involves the capital budget which is optimal that implicates to the invested capital’s amount at which marginal return derived from the investment equals to the capital’s marginal cost.
The organization which was selected seems to be performing according to the optimal capital budget because the capital’s amount which is raised by this organization and the one which is invested is capable of balancing the marginal return from investing and the capital’s marginal cost. It is suggested so by Chen, Weikart &Williams (2014). The company has the capital structure which is optimal in that it has the best ratio of debt to the equity which in turn maximizes its value and the capital’s marginal cost of this company tends to upsurge as it increases the additional capital as pinpointed by Milgram, (2015).

As this organization continues to make the additional investment in the new capital it has invested, returns on its investments continue to reduce as implicated by its opportunity schedule of the investment. Performing per the capital budget which is optimal is the one that has made this company capable of offering the balance amidst of the debt to equity ratio which is ideal in the alignment of minimizing the capital’s cost of the firm. The risk ranking tool was most appropriate tool while analyzing the budget selection which I made (Ostrom & Wilhelmsen, 2012).

References
Contino, D. S. (2001). Proposing the” capital” in capital budgets. Nursing Management, 32(10), 13-14.
Milgram, L. (2015). Costs of the Proposed Capital Budget. Managing Smart, 389-389.
Chen, G. G., Weikart, L. A., & Williams, D. W. (2014). Budget tools: Financial methods in the public sector. CQ Press.
Ostrom, L. T., & Wilhelmsen, C. A. (2012). Qualitative and quantitative research methods used in risk assessment. Risk Assessment: Tools, Techniques, and their Applications, 231-248.
Taggart, R. (2014). Capital Allocation in Multi-Division Firms: Hurdle Rates vs. Budgets. doi:10.3386/w1213