Project Report On

Debonair BD Collections

Project Report
1

On

Debonair BD Collections

Rozario, Marvin Course Instructor, Capital Budgeting Section: C

Prepared for

Prepared by
Afnan, Tasmia Ahmed, Tahsin ID: 09-13533-1 ID: 09-13277-1

July 15, 2012

LETTER OF TRANSMITTAL
2

July 15, 2012

Rozario, Marvin Course Instructor, Capital Budgeting American International University Bangladesh

Subject: Submission of the Project report on Debonair BD Collections.

Dear Sir, It is indeed a great pleasure to have the opportunity to submit the business report. We have prepared this business report on Debonair BD Collections. It is a partial requirement for your course Capital Budgeting. We would like to mention that we highly appreciate your suggestion for preparing this business report; while working on this report, we got the opportunity to learn a lot about the business process that how we have to calculate the capital budgeting tools (NPV, IRR, PBP, DPBP and PI) for a business to make the perfect decision that, should we except the business project or not. So, we hope that your honor will be kind enough to accept this report and bless us.

Sincerely yours, Afnan, Tasmia Ahmed, Tahsin ID: 09-13533-1 ID: 09-13277-1

Acknowledgement
By the grace of Almighty Allah, we would like to say that the submission of the Business project report titled as Debonair of BD collections has gifted us with many delightful moments. Completion of this report has made us grateful to a number of people. First of all, we would like to thank our course instructor Rozario, Marvin for giving us this wonderful opportunity to do this report. By this report, he intends to get us experienced on to analyze a business. Throughout the Capital Budgeting course, till now, he has helped and supported us in every way possible and it is because of such devotion and cooperation that this report has turned into a great success. It is our honest confession that without his valuable guidance and suggestion, it would never have been possible to complete this project successfully. Moreover, we also like to thank our relatives and friends who helped us by giving their valuable opinion to make our project successful.

Table of Content

Contents
Introduction The Opportunity The Logo of the Debonair BD Collections Debonair BD Collections Mission Statement Vision of the organization External forces shaping the industry Business Model (Company profile) Advertisement and Promotion Products Pricing strategy Financial Projection Capital Budgeting Techniques Scenario and Sensitivity Analysis Findings and Recommendations Conclusion

Page Number
5 6 8 8 9 11-12 13 14-15 16 17 18 25-27 28 28 29

Table of Charts

Contents
Overall Industry information Some strategic indicators Start-up cost Other Start-up cost Machinery, land & other Costs of the company (Yearly) Salary Expenses (Yearly) Revenue (Sales Forecast) of the company Cost of Goods Sold Incremental Cash Flow of the Company Beta Calculation for the Company Calculating Capital Budgeting Tools

Page Number
10 10 19 19 20 20 21 22 23 24 24

Introduction
Debonair BD Collections- is a fashion house selling exclusive ladies wear. We sell Exclusive saree and Kameez, Regular Saree and kameez, Bridal wear for formal parties, weddings, celebrations (Eid etc). We have Seasonal collection for summer, winter and autumn. We are located in Gulshan-2 and we serve the women from Ultra high, Lower high and higher middle class families. We are two partners initially investing in our business, both contributing equal amount and sharing equal profit. Our management team also includes us. We have conducted thorough market research before we decided to invest in our current business plan consists the interview of the executives of our competitors, questionnaire survey, and secondary research and so on. We have collected detailed data and conducted in depth analysis about our market, industry and competition. These data and analysis has given us the impression about the over all feasibility, profitability, risk etc about the business. We have decided to sell Indian cloths like our major competitor Vasavi, Shoppers world etc. But we will sell indian product at a lower price than our competitor and make up that from selling Pakistani product at a higher price which is not being offered by any of our major competitor. We have a major marketing campaign to establish our business. We have multi dimensional market penetration strategy by using billboards, Television promotional program, Magazine advertisement, leaflet and after sales offers. We have a substantial initial investment which we will finance from multiple sources. As per our moderate projections our business is a profitable one with enough opportunity for future growth, expansion and diversification.

The Opportunity:
Its an era of globalization and people are becoming closer day by day. There taste and preferences are becoming similar. This trend has also gripped the clothing sector of the whole world. In Bangladesh also people are becoming more and more concern about their outfits and there is a significant increase in spending on the apparel sector. But if we compare between the male and female sector it can be found that female segment has been more profit generating for this apparel sector. When we did our research we found that though there are lots of fashion houses but there is still a significant gap between the customers expectations and the offers of different existing fashion houses. So we came up with the idea to establish Debonair BD Collections as a Fashion House in order serve the female segment not only with the good quality of product but also at a reasonable price. After thorough market and industry research we found that most of the fashion houses that offer exclusive collection of womens wears mainly bring their supply or products from India and very few from Pakistan. So we decided to use the combination of both Indian and Pakistani apparel. We will offer an upscale and glamorous range of traditional party-wear dresses for women such as sarees, salwar kameez and lehengas, that are specifically designed for special occasions such as weddings, formal dinner parties, social events etc. In addition to this, we offer exclusive and unique collections for the special festivals like Eid, Pohela Baishakh, and New Year etc. The key factors that can increase our profit margin are the stable economic conditions of the country, stable political condition, excellent communication procedure, cultural and social background of Bangladesh and the also the ever-changing youth who dont follow a specific trend rather than they try to set their own trend.

The Logo of the Debonair BD Collections:

We didnt put any graphical symbolic picture to make our logo. We just put our companies name and the hidden meaning of it. The name Debonair will represent our products which mean Stylish, Charming, Cultured, Dashing etc.

Debonair Statement:

BD

Collections

Mission

Our mission is to provide desired fashionable products to our valued customers, strictly maintaining high Ethical Standards while we conduct Business and it will also help our country to overcome its economic condition.

Vision of the organization:

The vision of the Debonair BD Collections is to establish us as worlds one of the famous fair trade fashion house, and to remain market leader throughout its business. We will expand our business in international arena.

Industry Analysis:
After determining the market size which is 221400 households we identified the location our target market mostly resides. This location specific knowledge about our target market will help us to direct our marketing and communication effort (billboard, newsletter, leaflet distribution) into these specific areas. Next, we determine the professional affiliation of our target market to better understand their need, taste and preference, buying pattern, buying behavior. In the process we identified the specific taste and preference of our target market. Our market research which includes closely following Fashion magazines and newspapers, websites, questionnaire survey, a small focus group discussion, visiting our competitors and talking to the employees, customers and observing their operation, services, products, etc carefully and interviewing the top executives, owners of the competitor firms as well as following customer buying pattern and fashion trends we have formed a in- detail idea about the over all industry. This in depth knowledge of the industry is what has made us confident that we can successfully launch a new business in upscale female party wear and exclusive clothing industry. Also the opportunities associated with different industry trends like the short life cycle of different fashion, style, design made it an interesting business with many opportunities as well as the higher sales volume, profit and higher growth rate compare to Men and Kid's wear segment make the 10

women wear segment the most profitable and lucrative to invest for a new firm. We have also identified some new features like launching Pakistani dresses, serving only the women wear and high emphasis on marketing as key factors to become successful in this competitive market. We have also identified our key competitor in the market and find out in details about their strength and advantages they have over us and the advantages we have over them.

Overall Industry information:

Target Market Size
221400 Gulshan DOHS Uttara Baridhara Students

Location Profession Age

Taste and

Occasion Trends ProfitabilityGrowth Rate

preferenc e
18-29 Quality Comfort Design Prestige Eid Wedding Summer Winter Shorter More sales life-cycle,volume, becomes compare to out-ofMen, Children. High Growth Rate (According industry insiders) to

households Banani

Jobholders 30-39 Style housewife 40+ women

New Years Quickly profit

Dhanmondibusiness

Regular etc fashion

Some strategic indicators:

Key Factor industry
Differentiation, Brand

success Our in the differentiatio n strategy

Pakistani

Key competitors

Competito rs advantag es Establishe d business,

Existing

Our advantages

Vasavi, Shoppers

New

product line, effort given

Identity, goodwill,

cloths in addition to

Higher

Market

world, Khan brothers, 11

to our marketing program.

Efficient

Sales Indian cloths,

customer

force.

Serving

only

Dressy

dale

relationship

the women wear market.

etc

External forces shaping the industry:

Societal and Cultural Background: The societal and cultural factor is one of the most motivating factors for this business. We have a long cultural history regarding those types of outfits which will be provided by Debonair BD Collections. Culturally the women of Bangladesh have a great interest in sarees, kameez and lehengas for weddings, social events or even for the formal dinner parties. Moreover, here people are becoming more familiar to the global culture which is creating demand for the apparel of other countries and culture especially which are similar to our culture. Trends: By analyzing the trend in the clothing sector it can found that the women are becoming not only increasingly conscious about quality but also about the fashion. Though it has been true for most of the women youths are the major player regarding fashion and uniqueness. These youths have their own creative style of dressing and believe in setting a trend rather than following a trend set by others. They are now not tied to only one kind of clothing item rather they are now looking for varieties in the clothing items for different occasions. Fashion and uniqueness has been determinant factors in case of purchasing of attire. Technological Enhancement: Because of globalization the latest technologies are becoming more and more available which have made the production procedure not only easy but also enhanced the productivity streamlined with great quality. Technological enhancement in the world of media has brought people more closely than ever before. This has created a sense of fashion and uniqueness in the people which 12

can be a really motivating factor regarding this business.

Economy: Economic factors like the level of disposable income, buyer's confidence to spend on luxury goods are some crucial variable related to this kind of business. Moreover, the business we are going to start is very much dependent on the economic well being of the country. If the economic condition is not suitable to our business, the whole project may fail. In this analysis we have found that though a global recession is going on the economic condition of Bangladesh has been less affected compared to other countries and the economy is now pretty stable. The economic growth is such that many people have money to support their luxurious lifestyle. The overall growth rate in economy and spending on luxurious items is good. Bangladesh is entering into the global economy rapidly. So the overall economic condition is suitable for this business.

13

Business Model (Company profile)

We will initially have only one shop in Gulshan-2 area. The shop will be a rented 2-3 storey building in any major road. Our budget accommodation for rent is high as we want to rent a place which is easy to identify and access. The location should also be in consistent with our business's upscale and exclusive image. The house we rent will accommodate our store in the ground floor and first floor and it will also accommodate our warehouse in the second floor. As we sell only women wear which is generally available in free sizes (sarees and kameez) we need not to keep the inventory of different size which will significantly reduce the complexity and space requirement of our inventory storage and management. Each floor in our shop will be approximately 30004000 square feet. We will have a stuff of 30 slaes persons in two shifts. Our sales persons will be highly paid, efficient, friendly, respectful and helpful to the customers. One of our key success factors will be the efficiency of our sales force. Also 10 security person for security, storefront services like opening the door and greeting customer etc. We will have counter persons, cleaner, inventory carry personnel etc. Our management team will consist of the two partners who will look after marketing, sales, finance, supply and inventory etc as well as a Managing Director / CEO to co-ordinate all the different activity. We will have an engaging marketing program that includes billboards, Television sponsorship of different ladies shows like Fashion clothing, beauty program, gossip program etc. We will also have a fashion and other lifestyle and general magazine advertises, leaflets, special offers etc included in our marketing program. We will have shelves; racks as 14

well as display platforms display our product. We will have different section for exclusive sarees, kameez, regular saree and kameez and bridal sections. Lighting both within and outside the shops are essential and we have put much thinking and have allocated sufficient budget for lighting both within and outside of the shop. We will have different sales, inventory, accounting software and our computers will be networked to accommodate and easily access sales data, inventory data, customer data etc. We plan to custom made our software from local IT firms and has sufficient budget for that. We will provide parking service, chairs to sit inside the shop, different washrooms for male, female and employees. We will offer service like offering to carrying the bags of the customer if the customer have purchased multiple items and in need of help carrying the bags, we will also provide pure drinking water, after sales services include partial refund, product return with in a specified period of the purchase. We will offer membership to any customer who has made a more than average purchase in terms of price, multiple purchase etc. We will keep contact information to later inform our customer about new arrivals, special offers, collections, discounts etc via newsletter, sms, email etc. In short, we though out every details carefully and checked all the necessary requirements by comparing with ourselves with our competitors.

Advertisement and Promotion:

As we have decided to have a bigger, more attractive and eye catching marketing program than our competitors to win our customers advertising and promotion is at the heart of our marketing program. We have identified billboard as a very effective means of reaching our target customers who happen to resides in few specific locations we have already identified. So, we will be concentrating specifically on our target customers if we give our billboard advertisement in their areas of 15

residence. We will have billboards of 1000-1200 square feet in Gulshan1, 2, Banani, Dhanmondi, Uttara, Mohakhali. And 500-600 square feet billboards in Baridhara, DOHS, shegun bagicha, Eskaton, shantinagar ares stc. The billboard advertises can have a range of rate starting from 250-300 tk per square feet to 450 per square feet in Gulshan and Banani area and more than 1000 tk in places like Airport road, Mohakhlai etc. We will also have Advertises in fashion magazines, lifestyle magazines and general magazines like ICE Today, purple, Girl's fashion etc. In magazine ads the rate start from 15000 tk per page and ends at 20000 tk per page in the case of ICE Today, the leading magazine with the highest number of readership. In television we will sponsor various programs which are specifically popular among women like fashion and beautification, gossip programs. We have a substantial budget for the television segment. We will also distribute leaflets in places like Bashundhara city mall, Jamuna city and other shopping malls, in Gulshan, Banani, Baridhara, DOHS, Dhanmondi areas and, schools, universities, beauty parlor, gym and spa, boutique etc. We will also have special offers for our customers like highest purchasers and lucky coupon winners getting free dinner for two in Westin, family buffet dinner in places like Emanuels, Saffron, Topkapi etc. We will retain our customers by regularly updating them with new arrivals, special discount, seasonal collections and sending acknowledgement via sms, newsletter and emails.

16

Products:
Our trendy, designer party wear for women with superior quality, style, craftsmanship and with a high price tag makes a product that is inherently exclusive in nature. Our product line will consists of the following categories: Sarees (exclusive and regular) Salwar Kameez (exclusive and regular) Bridal collections (for weddings, receptions etc.) Festive collections (Eid, Pohela Baishakh etc)

Distribution / Place: We will deliver our product through our own

shopping outlet. Our shopping outlet will be located in Gulshan-2 area and our shop will be a 3-storey outlet in a building that will accommodate only our shop. This type of shop is the standard form of outlet in the industry and our entire competitors pursue the exact same model as the one we are planning to pursue.

Differentiation: Our competitor are buying Indian product, and we

as per our policy to differentiate ourselves from our competitor have decided to sell Indian product as well as Pakistani product. Now for two different products our value proposition will be different. For the Pakistani product will be charging more prices for better quality and for 17

Indian product since our competitors sell Indian product our value proposition will be charging less for the same product to get some portion of the market share from the competitors.

Pricing strategy:

a) We got overall idea of our products price range from our competitors. Like: Vasabi, khans brothers, shoppers world. We took their prices of exclusive saree, exclusive kameez and bridal dresses as reference to get an idea. b) We do survey of our target market. From there we got information about our target markets preference of prices. Like we ask them for exclusive saree, kameez, regular saree, kameez how much money they want to pay or they think feasible. They give us information about the range they think as affordable. c) We give good quality product. Of course the design, materials are also exclusive. Our supplies are from India and Pakistan. So we think the prices we have set are justified.

18

Financial Projection:
Ownership:
Organizational plan starts with the concept of the type of the business. The ownership pattern of our business is mainly the partnership business. Debonair BD Collections is a general partnership business as we are two members who initiated the plan for this business.

Cost of starting a business:

Cost of starting our organization is depending on the agreement of our organization. The start up cost is little bit more than any other clothing company. The starting cost is Taka 14 million for our organization including all other costs related to organization. Primarily the start up cost will be provided by the owners of our organization & loan from bank.

19

Start-up cost:
At the starting point we need to spend money for getting government, to do registration and get license for the company and also we have to register our logo in Patent and Trademark office. This cost will be like:

Start-Up Cost: Particulars

Land Lease yearly payment Computer hardware and software Miscellaneous Expense (Security Camera+ Furniture + Interior Design)

Amount
720,000 1,000,000 600,000

Total Other start-up Cost: Particulars

Reg. & License Registration logo Building Cost

2,320,000

Amount
500,000 300,000 10,000,000

Total

10,800,000

20

Machinery, land & other Costs of the company (Yearly):

Machinery, land & other start-up Cost (Yearly): Particulars
Rent Bills (utilities, phone, internet, hosting etc) Operational costs (accounting, legal fees, insurance, IP etc) Marketing costs Packaging /Boxes Business Supplies Bank Card Machine and Supplies Advertisement cost Transportation Cost

Amount
960,000 15,00,000 600,000 400,000 100,000 700,000 300,000 12,00,000 500,000

Total

3,560,000

Salary Expenses (Yearly):

Salary Expenses: Particulars

Purchase Dept. Store Keeper R&D Dept. (2 Scientist) Sales Representative Purchase Manager Production Manager Sales Manager Accountant Security Guard & Cleaner

Employer's NO
2 3 2 30 2 2 1 2 15 21

Salary
5000 5000 28000 10000 15000 17000 18000 15000 5000

Month Amount
12 12 12 12 12 12 12 12 12 120000 180000 672000 3600000 360000 408000 216000 360000 900000

Office Pion

4000

12

96000

TOTAL SALLERY(Monthly)

691200 0

Revenue (Sales Forecast) of the company:

Year-1 Product
Regular Sarees Exclusive Sarees Regular Salwar Kameez Exclusive Salwar Kameez Bridal collections (for weddings, receptions etc.) Festive collections (Eid, Pohela Baishakh etc) Seasonal collections (summer, spring and winter collections).

Quantit Per y Price

8000 10000 15000 10000 6000 5000 12000 15000 30000 8000 20000 60000 6000 8000

Total Revenue
120000000 300000000 120000000 200000000 360000000 30000000 96000000

Total Revenue= Year-2 Product

Regular Sarees Exclusive Sarees Regular Salwar Kameez Exclusive Salwar Kameez Bridal collections (for weddings, receptions etc.) Festive collections (Eid, Pohela Baishakh etc) Seasonal collections (summer, spring and winter collections). Total Revenue=

1226000000

Quantit Per y Price

10000 15000 20000 15000 8000 10000 15000 15000 30000 8000 20000 60000 6000 8000

Total Revenue
150000000 450000000 160000000 300000000 480000000 60000000 120000000

1720000000

22

Year-3 Product
Regular Sarees Exclusive Sarees Regular Salwar Kameez Exclusive Salwar Kameez Bridal collections (for weddings, receptions etc.) Festive collections (Eid, Pohela Baishakh etc) Seasonal collections (summer, spring and winter collections).

Quantit Per y Price

20000 20000 25000 25000 15000 20000 20000 15000 30000 8000 20000 60000 6000 8000

Total Revenue
300000000 600000000 200000000 500000000 900000000 120000000 160000000

Total Revenue=

2780000000

Cost of Goods Sold

Cost Of Goods Sold:
Year1 year2 year3

Particulars
Transpotation cost Labour cost Miscellaneous Cost of goods sold

Amount
2,00 0,000 500000 200,000 2700000

Amount
1,50 0,000 400000 200,000 2100000

Amount
1,000 ,000 400000 200,000 1600000

Total=

5,400,000

4,200,000

3,200,000

23

Incremental Cash Flow of the Company

Incremental Cash Flow: Particular
Revenue COGS Gross Profit Expenses Setup cost Other Start-up cost Expenses: Salary Rent Bills (utilities, phone, internet, hosting etc) Operational costs (accounting, legal fees, insurance, IP etc) Marketing costs 2,320,00 0 10,800,0 00 6912000 960,000 15,00,00 0 600,000 400,000 24 6912000 960,000 15,00,000 600,000 400,000 6912000 960,000 15,00,000 600,000 400,000

Year-0

Year-1
122600000 0 5,400,000 1,220,600 ,000

Year-2
1720000000 4,2 00,000 0 1,7 15,800,000

Year-3
2780000000 3,200,00

2,776,8 00,000

Packaging /Boxes Business Supplies Bank Card Machine and Supplies Advertisement cost Transportation Cost Total expense: EBT Tax-25% Net Income Dep.

100,000 700,000 300,000 12,00,000 500,000 10472000 1,210,128 ,000 302,532,00 0 907,596,00 0 500,000

100,000 700,000 300,000 12,00,000 500,000 10472000 1,7 05,328,000 42 6,332,000 1,27 8,996,000 500,000 2,000

100,000 700,000 300,000 12,00,000 500,000 10472000 2,766,3 28,000 691,58 2,074,74 6,000 50 0,000

Cash flow operation

13,120, 907,096, 1,278, 2,074,246, 000 000 496,000 000

Beta Calculation for the Company:

Company Name Vasavi Shoppers world Khan brothers Dressy dale Beta coefficient Risk free rate Market risk Discount rate

Beta
0.664394645 1.148038585 0.317446026 1.046116601 0.793998964 12 15 14.38

25

Calculating Capital Budgeting Tools

Particular s
Year 0 Year1 Year2 Year3

Cash flow
(13,12 0,000) 907,09 6,000 1,278,49 6,000 2,074,24 6,000 3,143,3 19,345 0.01 0.02 69.55 240.58

CCF
907,096 ,000 2185592000 4259838000

Discounted CF
793,05 4,730 977,23 5,396 1,386,14 9,219

DCCF
793,054 ,730 1770290126 3156439345

NPV PBP DPBP IRR PI

CAPITAL BUDGETING TECHNIQUES Through selection of the most appropriate investment alternatives, capital investment decision can be taken into consideration. This can be done using different techniques. Following are the various techniques: Net Present Value (NPV): NPV of a project refers to the excess of present value of future cash flows from a project over the present value of investment for the same.

N P V=

C ft
t

t = 1(1 + k )

I0

Here Cft = Cash flows in different times t = No. of years k = Discounting rate 26

I0 = Initial investment In this case we have used 14.38% as the discount rate. Using the excel worksheet we get the NPV of the project is = 3,143,319,345. Comment: If the project NPV is positive, we will accept the project. So here we can see that our NPV is positive so we will except the project Pay Back Period: This refers the length of time required

to recover the cost of an investment. According to this technique, a project that requires minimum time to recover the investment cash outlay in nominal amount is the best alternative. The PBP of the project will be = 0 + {(13120000-00)/907096000} = 0.01 years Comment: As the pay back period is less than 1 year. So the project should be taken.

Discounted Pay Back Period: This is an investment decision rule where future cash flows are discounted at an interest rate and then one determines how long it takes for the sum of the discounted cash flows to equal the initial investment. In this project it is found that the sum of the discounted cash flow is 0.02. Comment: As the discounted pay back period is less than 1 year. So the project should be taken.

The Internal Rate of Return (IRR): IRR is the internal rate of return at which a projects future cash inflows are discounted and they will become equal to the present value of its investment. Thus the IRR is a rate that implies the implicit rate one investor

27

can expect to earn from the investment being considered for investment.

t =1 (1 +

Cft IRR)
t

I0 = 0

Although IRR can be calculated using the interpolation method, in this case we have calculated it using the excel work sheet. IRR of this project is 69.55%. Comments: As the IRR is greater than the discount rate (14.38%), so we should accept the project.

Profitability Index (PI): This is the index which

attempts to identify the relationship between the costs and benefits of a proposed project. By using excel our calculated PI is 240.58. Comment: A ratio of 1.0 is logically the lowest acceptable measure on the index. Any value lower than 1.0, indicates that the project's NPV is less than the initial investment. As PI of the project is greater than 1, so we should accept the project.

Calculating Discounting Rate

28

The formula of calculating discount rate is: Discount Rate = = 12+ 0.793998964 (15-12) = 14.38%

Company Name Vasavi Shoppers world Khan brothers Dressy dale Beta coefficient Risk free rate Market risk Discount rate

Beta
0.664394645 1.148038585 0.317446026 1.046116601 0.793998964 12 15 14.38

Scenario and Sensitivity Analysis

The result of the scenario and sensitivity analysis found from the calculation in the spreadsheet has been attached to the appendix part of our assignment paper.

Findings and Recommendations

By using traditional techniques we get the following results:

29

NPV PBP DPBP IRR PI

3,143,3 19,345 0.01 0.02 69.55% 240.58

Net present value of the project is positive. Payback period is less than four years. Discount rate payback period is less than 1 year. IRR is 69.55% whereas our discounting rate is 14.38%. PI is 240.58 which is greater than 1 indicating it is a good project. As a result, we should accept the project.

Conclusion
As entrepreneurs, we have to go through a lot of stress in order to achieve the desire destination. We make our plan enriched by including uniqueness and connection of reality. We made financial plan for three years. We will gain market share and able to establish the brand image in our targeted customers mind. Net Present Value of our project is positive. So we should accept the project. The success of a business depends on the capital budgeting decisions taken by the management. The management of a company should analyze various factors before taking 30 a large project. Firstly,

management should always keep in mind that capital expenditures require large outlays of funds. Secondly, firms should find modes to ascertain the best way to raise and repay the funds. The management should also keep in mind that capital budgeting requires a long-term commitment.

31