It may include determination of which major investments or projects should be undertaken. Examples of capital budgeting are expansion of operations, buying new equipment, entry into a new market. Decisions formed as part of capital budgeting help make a project-specific choice by weighing the returns, costs, and levels of risk associated with every investment opportunity.

For example, if the company is planning to buy a new machine, then they will decide on the machinery cost, profit that they want to earn from that very machine, and how long it would take in order to gain that money. Hence, it requires any type of business which may yield the greatest profit over a time period. more