This summer training report has been prepared as a partial fulfillment of the Masters in Business Administration of Lovely Professional University, Department of Management. The training was undertaken at Coal India so as to get an insight and understanding into the same industry and also to pursue the prospect of a career.
Central Mine Planning & Design Institute Limited (COMPILED) is a Government of India enterprise having its corporate headquarters at Rancho in India.It is a fully owned subsidiary of Coal India Limited (CEIL) and a Schedule-B company. It is a Mini Rattan (Category II) company since May 2009 and ISO 9001 certified since March 1998. It is also on way for ISO 27001 certification for its information security management. This project emphasis on "Capital Budgeting Techniques at Central Mine Planning & Design Institute Limited (COMPILED), Rancho, Shorthand. Capital Budgeting is crucial in the minimization of shareholder value as it depends on the capital budgeting decisions made by the managers.
The techniques are divided into two types: one, traditional (non-discounting) that includes pay back method, accounting rate of return (AIR). Two, discounting cash flow that includes Net Present Value (NAP), Internal Rate of Return (AIR), Profitability Index (P'). The capital budgeting technique mainly used by COMPILED is Internal Rate of Return (AIR). The main reason for the use of AIR, as a criterion to accept capital investment decision involves a comparison of AIR with the required rate of return known as cut off rate.The reality out of the study witnessed for the investment decision to be viable the project is accepted when AIR is equal to or greater than 12% at 85% of the project capacity. Else the project is rejected.
Capital budgeting is a required managerial tool. One duty off financial manager is o choose investments with satisfactory cash flows and rates of return. Therefore, a financial manager must be able to decide whether an investment is worth undertaking and be able to choose intelligently between two or more alternatives.To do this, a sound procedure to evaluate, compare, and select projects is needed. This procedure is called capital budgeting.
Capital budgeting is investment decision-making as to whether a project is worth undertaking. Capital budgeting is basically concerned with the Justification of capital expenditures. Current expenditures are short-term and are completely written off in the same ear that expenses occur. Capital expenditures are long-term and are amortized over a period of years are required by the IRS.Capital budgeting usually involves the calculation of each project's future accounting profit by period, the cash flow by period, the present value of the cash flows after considering the time value of money, the number of years it takes for a project's cash flow to pay back the initial cash investment, an assessment of risk, and other factors. Capital budgeting is a tool for maximizing a company's future profits since most companies are able to manage only a limited number of large projects at any one time.