+1 862 207 3288 Expansion Projects – Firms usually face an increase in demand for their output which is unable to meet by their existing installed capacity. Thus they have to take a decision for increasing their installed capacity by investing additional capital. Such projects are termed as “Expansion Projects”.
Replacement Projects – The economic life of every plant or machinery lasts for a few years, after which it becomes worn-out, or obsolete (with only some scrap value left) and requires capital expenditure for its replacement.
Diversification Projects – These projects are also known as Modernization Projects.
Along with the constant technological changes a firm has to upgrade its production technology every now and then. Keeping pace with changes in technology is essential for the very existence of the firm; otherwise it may become outdated and may not be in a position to face competing forces in the industry. Modernization projects require heavy capital expenditure for which proper capital budgeting decisions have to be taken.
Sales Campaign Projects – Manufacturing firms are always on the search for new markets. They try to find new areas where they can sell their products. With this end in view, market surveys have to be conducted followed by advertisement and sales campaigns requiring heavy capital expenditure.
R & D Projects – These projects are named as an abbreviation for Research and Development Projects. These projects require setting up of research labs and availing of the services of scientists and technologists which may result in substantial capital outflows. The resultant cash-inflows (benefits) from R & D projects cannot be estimated precisely or directly, partly because such benefits may be abstract in nature because they may occur in distant future.
