UNIVERSITY OF MUMBAI

Capital Budgeting OF M/S DEEPAK NITRITE LIMITED

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF DEGREE

OF

BACHELOR’S IN COMMERCE (ACCOUNTING & FINANCE)

UNDER THE FACULTY OF COMMERCE

BY

SUMIT VIJAY KAMBLE

UNDER THE GUIDANCE OF

PROF.

NEW PANVEL,

NAVI MUMBAI, MAHARASHTRA 410206

MARCH 2018-2019
 DECLARATION

I the undersigned Mrs. SUMIT VIJAY KAMBLE here by, declare that the work embodied in

this project work titled “Capital Budgeting ” forms my own contribution to the research work

carried out under the guidance of “ ------” is a result of my own research work and has not been

previously submitted to any other university for any other Degree / Diploma to this or any other

University.

Wherever reference has been made to previous works of others, it has been clearly indicated as

such and included in the bibliography.

I, here by further declare that the all information of these documents has been obtained and

presented in accordance with academic rules and ethical conduct.

Name

SUMIT VIJAY KAMBLE

Signature of Learner

Certified by

Signature of guiding Teacher

 CERTIFICATE

This is to certify that Mrs. SUMIT VIJAY KAMBLE has worked and duly completed her

Project Work For the degree----- under the faculty of commerce in the subject of Advance

Financial Accounting of his project is entitled “Investment Avenues of M/S Deepak Nitrite

Limited” under my supervision.

I further certify that the entire work has been done by the learner under my guidance and that no

part of it has been submitted previously for any degree or Diploma of any university.

It is his own work and facts reported by his personal findings and investigation.

Name and signature

Guiding teacher

Date of submission
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are numerous, and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in
the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my principal, Dr. for providing the necessary facilities required for
completion of this project.

I take this opportunity to thank our coordinator, Prof for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide Prof whose guidance
and care made the project successful.

I would like to thank my college Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout my
project.
Index

Sr. No. Chapter Page No.

INTRODUCTION
07
1.Introduction of investment 09
2. Keys trends of investment in india 10
3. Individual wealth forecast 13
3.1 Equity 14
1 3.2 Debentures 15
3.3 Bonds or fixed income securities 18
3.4 Money market instruments 20
3.5 Non-Marketable financial assets 24
3.6 Real Estate
25
3.7 Precious objects
3.8 insurance polices 27

Research Methodology

31
2 Objective of study
33
2.1 Pension funds
35
2.2 Mutual funds
39
2.3.Characteristics of Investment Management
2
41
2.4 Necessity and Importance of Investments

37
2.5 Factors Favouring Investment

2.7 Techniques of data collection

 CHAPTER 1

CAPITAL BUDGETING

1. INTRODUCTION

This chapter introduces the capital budgeting decision and its significance. Later it
throws light on the need, scope and objectives of this study. The organization of study
and its limitations are discussed at the end of the chapter.
The term “capital budgeting” refers to long term planning for proposed capital outlays and their
financing. Thus it includes both rising of long term funds as well as their utilization. It may thus be
defined as “the firms formal process for the acquisition and investment of capital” .it is the decision
making process by which the firms evaluates the purchase of major fixed assets. It involves firm‟s
decision to invest its current funds for addition, disposition, modification, and replacement of long
term or fixed assets. However it should be noted that investment in fixed assets is also to be taken as
a capital budgeting decision. Ex: A new distribution system may call for both new warehouse and an
additional investment in investors. An investment proposal of this nature must be taken as capital
budgeting decision evaluated as a single package but not as an investment in a fixed asset (i.e.
warehouse) and in a current asset (investment) separately.

1.1 Finance Function

Finance may be defined as the management of money in such a way that it is

available at the time it is required. Every organization, big or small, needs finance to
carry out its day-to-day operations and attain its defined goals. In fact, finance affects
not only the survival and growth but also virtually the whole existence of almost any
business organization-financial or non-financial, private or public, large or small,
profit seeking or non-profit organization. Being indispensable, finance is rightly
known as the ‘lifeblood and nerve center’ of any organization. It is indeed this
importance of finance that has led to the emergence of the concept of corporation
finance, popularly known as financial management. Financial management deals with
control of the scarce financial resources by any organization.

Accordingly, financial management is the managerial activity, which is

Concerned with the planning and control of firm’s financial resources (Pandey,
1995).The finance function in the Indian corporate sector has undergone a massive
Change over time. Traditionally, the finance function had a limited scope of
procurement or raising of funds by corporate enterprise to meet its financing needs
with little emphasis on allocation of funds. The finance managers were only
concerned with episodic financing that is raising funds at the times of expansion,
diversification, mergers, consolidations, reorganizations etc., and completely ignored
the aspect of efficient allocation and utilization of funds.

However, the accelerating pace of industrialization, technological inventions

and innovations, intense competition, government intervention, population growth etc.
all led to the need for an effective utilization of firm’s financial resources to gain a
niche in the era of cut throat competition. The emphasis thus shifted from episodic
financing to financial management and from raising of funds to efficient and effective
utilization of funds. The modern approach views financial management in broader

sense and provides a conceptual and analytical framework for financial decisionmaking.
The finance function thus covers both acquisition as well as allocation of
funds, in modern times
According to Deolanker (1996) and Van Horne (1994), financial management
in the modern sense comprises of three major decisions as functions of finance
namely, Investment decision, Financing decision and Dividend policy decision. A
combination of these three maximizes the value of firm to its shareholders. However,
Pandey (1995) added a fourth decision, i.e. Liquidity decision. Thus the finance
function, today, revolves primarily around four major and core decisions of

 Financing (Capital Structure Decision): This refers to the decision of when,

where from and how to acquire funds to meet the firm’s investment needs, i.e.
to determine the appropriate proportion of debt equity mix.

 Investment (Capital Budgeting Decision): This refers to the decision of

allocation of capital or commitment of funds to long term assets that would
yield benefits in terms of cash flows in future.

 Dividend (Profit Allocation Decision): This deals with deciding the proportion
of profits to be distributed (dividend- payout) and the proportion to be retained
(retention ratio) in the business.

 Liquidity (Working Capital Decision): This deals with current asset

management so as to strike a trade-off between profitability and liquidity.

Out of these four prime decisions, the investment decision, i.e. the efficient utilization
and management of funds so as to maximize shareholders’ wealth, is now treated as
the central issue of financial policy under the modern concept of finance function.

1.2Capital Budgeting Decision

According to Pandey (1995), the investment decision of a firm, popularly known
as the capital budgeting or capital expenditure decision, may be defined as the firm’s
decision to invest its current funds most efficiently in long term assets in anticipation
of expected flow of benefits over a series of years. It is the process of making
investment decisions in capital expenditure, defined as that expenditure which is
incurred at one point of time whereas the benefits of it are realized at different points
of time in future. It involves sacrifice of a certain amount of present resources in
exchange for a future return and an arbitrage over time that involves risk. To quote
Jain and Kumar (1998), “A typical investment or capital budgeting involves certain
sacrifice of resources now in exchange for an uncertain but hopefully large inflow of
resources in the near or distant future.” Capital expenditure may take several forms
like cost of acquisition, addition, expansion, improvement in the fixed assets as land
and building, plant and machinery, goodwill etc., cost of replacement of permanent
assets, research and development, and diversification into new business areas.
Investment decision is important because it determines the value of a firm by
influencing its growth, profitability and risk. It is considered to be one of the most
important decisions because it has long-term implications for a firm. The financial
manager before going in for any kind of investment engages himself with rational
matching of present value of benefits with present costs so as to increase Net Present
Value of a project, which in turn will increase the market value of shares of a firm and
ultimately maximizes shareholders’ wealth.

In short, capital budgeting is the process of deciding what investment decision

should be taken and which project is beneficial for a period of time keeping in mind
the objective of maximization of shareholders’ wealth. These decisions involve
commitment of huge funds that too for a longer period which also changes the risk
complexion of business. This decision, if undertaken judiciously, helps in providing
the benefits of maximization of wealth not only for the concerned organization and
industry but also for the economy as a whole. On the other hand, if this decision is not
given its due importance, it will ultimately lead to the decline and demise of even a
growing prosperous organization.

1.3 Capital Budgeting Process

Capital budgeting is a very complicated process as it involves steps relating to

the investment of current funds for benefits in future. The process may differ from
one concern to another but, overall, the process involves following steps:

1. Identification of investment proposal: Capital budgeting process starts with

identification of investment proposals. It is very important to select the best
investment proposal. The departmental head analyses various proposals in the light of
the corporate strategies and submits the suitable proposals to the Capital Expenditure
Planning Committee of the business enterprise.

2. Screening of proposals: After identifying proposals, the Capital Expenditure

Planning Committee screens various proposals, which are received from different
departments. The committee views and checks these proposals and compares it with
the company strategies.

3. Evaluation of various proposals: The next step in this process is to evaluate the
profitability of various proposals. To evaluate the profitability, various methods can
be used, e.g. Payback period method, Accounting Rate of Return method, Net Present
Value method and Internal Rate of Return method etc.

4. Fixing priorities: It is very important to fix the priorities because on the basis of
priorities decisions are taken and proposals are selected. Unprofitable or uneconomic
proposals are rejected. It is very essential to rank the various proposals and to
establish priorities of these proposals.

5. Final approval and preparation of capital expenditure budget: After evaluation of

proposals and fixing priorities, the other criterion of final approval is its contribution
in the capital expenditure budget. It is very necessary to take correct decision or
accept the final proposal so that the company can get profits in future.

6. Implementing proposal: After preparation of a capital expenditure budget and

incorporation of a particular proposal in the budget, the next step involves
implementation of the project. When the project is implemented, it is very essential to
assign responsibilities for completing the project so as to avoid unnecessary delays
and cost overruns.

7. Performance review: The last stage in the process of capital budgeting is the
evaluation of the performance of the project. Evaluation is made through the
comparison of actual expenditure with the budgeted one. If any variations exist, then
steps may be taken to remove these in future.

Capital budgeting – Definition:

Capital budgeting (or investment appraisal) is the planning process used to determine whether a
firm's long term investments such as new machinery, replacement machinery, new plants, new
products, and research development projects are worth pursuing. It is budget for major capital, or
investment, expenditures.

Many formal methods are used in capital budgeting, including the techniques such as

 Accounting rate of return

 Net present value
 Profitability index
 Internal rate of return
 Modified internal rate of return
 Equivalent annuity

These methods use the incremental cash flows from each potential investment, or project
Techniques based on accounting earnings and accounting rules are sometimes used - though
economists consider this to be improper - such as the accounting rate of return, and "return on
investment." Simplified and hybrid methods are used as well, such as payback period and
discounted payback period.
1) Accounting rate of return:

Accounting rate of return, also known as the Average rate of return, or ARR is a financial ratio
used in capital budgeting. The ratio does not take into account the concept of time value of
money. ARR calculates the return, generated from net income of the proposed capital
investment. The ARR is a percentage return. Say, if ARR = 7%, then it means that the project is
expected to earn seven cents out each dollar invested. If the ARR is equal to or greater than the
required rate of return, the project is acceptable. If it is less than the desired rate, it should be
rejected. When comparing investments, the higher the ARR, the more attractive the investment.
 Basic formulae

2) NET PRESENT VALUE

In finance, the net present value (NPV) or net present worth (NPW) of a time series of cash flows,
both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash
flows. In the case when all future cash flows are incoming (such as coupons and principal of a bond)
and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows
minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF)
analysis, and is a standard method for using the time value of money to appraise long-term projects.
Used for capital budgeting, and widely throughout economics, finance, and accounting, it measures
the excess or shortfall of cash flows, in present value terms, once financing charges are met.

The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or
discount curve and outputting a price; the converse process in DCF analysis - taking a sequence
of cash flows and a price as input and inferring as output a discount rate (the discount rate which
would yield the given price as NPV) - is called the yield, and is more widely used in bond
trading.

3) PROFITABILITY INDEX
Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio
(VIR), is the ratio of investment to payoff of a proposed project. It is a useful tool for ranking
projects because it allows you to quantify the amount of value created per unit of investment.

4) INTERNAL RATE OF RETURN

The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and
compare the profitability of investments. It is also called the discounted cash flow rate of return
(DCFROR) or simply the rate of return (ROR). In the context of savings and loans the IRR is
also called the effective interest rate. The term internal refers to the fact that its calculation does
not incorporate environmental factors (e.g., the interest rate or inflation).

Definition:
 Showing the position of the IRR on the graph of NPV(r) (r is labeled 'i' in the graph)

The internal rate of return on an investment or project is the "annualized effective compounded
return rate" or discount rate that makes the net present value of all cash flows (both positive and
negative) from a particular investment equal to zero.

In more specific terms, the IRR of an investment is the interest rate at which the net present
value of costs (negative cash flows) of the investment equals the net present value of the benefits
(positive cash flows) of the investment.

Internal rates of return are commonly used to evaluate the desirability of

investments or projects. The higher a project's internal rate of return, the more
desirable it is to undertake the project. Assuming all other factors are equal among the
various projects, the project with the highest IRR would probably be considered the best and
undertaken first.

A firm (or individual) should, in theory, undertake all projects or investments available with
IRRs that exceed the cost of capital. Investment may be limited by availability of funds to the
firm and/or by the firm's capacity or ability to manage numerous projects.

Uses:

Important: Because the internal rate of return is a rate quantity, it is an indicator of the efficiency,
quality, or yield of an investment. This is in contrast with the net present value, which is an
indicator of the value or magnitude of an investment.

An investment is considered acceptable if its internal rate of return is greater than an established
minimum acceptable rate of return or cost of capital. In a scenario where an investment is considered
by a firm that has equity holders, this minimum rate is the cost of capital of the investment (which
may be determined by the risk-adjusted cost of capital of alternative investments). This ensures that
the investment is supported by equity holders since, in general, an investment whose IRR exceeds its
cost of capital adds value for the company (i.e., it is economically profitable).

Note that the period is usually given in years, but the calculation may be made simpler if r is
calculated using the period in which the majority of the problem is defined (e.g., using months if
most of the cash flows occur at monthly intervals) and converted to a yearly period thereafter.

Note that any fixed time can be used in place of the present (e.g.,the end of one interval of an
annuity); the value obtained is zero if and only if the NPV is zero.

In the case that the cash flows are random variables, such as in the case of a life annuity, the
expected values are put into the above formula.

Often, the value of r cannot be found analytically. In this case, numerical methods or graphical
methods must be used.
 5) MODIFIED INTERNAL RATE OF RETURN
Modified internal rate of return (MIRR) is a financial measure of an investment's attractiveness.
It is used in capital budgeting to rank alternative investments. As the name implies, MIRR is a
modification of the internal rate of return (IRR) and as such aims to resolve some problems with
the IRR.

Problems with the IRR:

While there are several problems with the IRR, MIRR resolves two of them.

First, IRR assumes that interim positive cash flows are reinvested at the same rate of return as
that of the project that generated them. This is usually an unrealistic scenario and a more likely
situation is that the funds will be reinvested at a rate closer to the firm's cost of capital. The IRR
therefore often gives an unduly optimistic picture of the projects under study. Generally for
comparing projects more fairly, the weighted average cost of capital should be used for
reinvesting the interim cash flows.

Second, more than one IRR can be found for projects with alternating positive and negative cash
flows, which leads to confusion and ambiguity. MIRR finds only one value.

Calculation

MIRR is calculated as follows:

Where n is the number of equal periods at the end of which the cash flows occur (not the number
of cash flows), PV is present value (at the beginning of the first period), FV is future value (at the
end of the last period).

The formula adds up the negative cash flows after discounting them to time zero, adds up the
positive cash flows after factoring in the proceeds of reinvestment at the final period, then works
out what rate of return would equate the discounted negative cash flows at time zero to the future
value of the positive cash flows at the final time period.

Spreadsheet applications, such as Microsoft Excel, have inbuilt functions to calculate the MIRR.
In Microsoft Excel this function is "=MIRR".

6) EQUIVALENT ANNUAL COST

In finance the equivalent annual cost (EAC) is the cost per year of owning and operating an
asset over its entire lifespan.

EAC is often used as a decision making tool in capital budgeting when comparing investment
projects of unequal lifespan. For example if project A has an expected lifetime of 7 years, and
project B has an expected lifetime of 11 years it would be improper to simply compare the net
present values (NPVs) of the two projects, unless neither project could be repeated.

EAC is calculated by dividing the NPV of a project by the present value of an annuity factor.
Equivalently, the NPV of the project may be multiplied by the loan repayment factor.

EAC=

The use of the EAC method implies that the project will be replaced by an identical project.

1.4 Why we should opt for a Capital Budget?

Here are nine good reasons why India should switch to a Capital Budget instead of the usual one
that focuses primarily on revenue-related issues:

 First, every economic entity has a capital budget, be it unstated and

implicit (like a household or kirana shop) or stated and explicit like in the
case of a company or an R&D lab.
 As the size and complexity of operations increase, it becomes all the more
necessary for an economic entity to structure, implement and review a
capital budget. A nation-state is the most evolved form of an economic
entity, and therefore needs a capital budget. We in India certainly need one.


 Second, there seems to be an obsessive interest in a 'revenue' budget. The annual tamasha
surrounding the end-February presentation of the Union Budget reinforces the feeling
that our economic pundits, commentators and critics are not able to step out of this frame
of reference and demand a 'capital budget'.


 While revenue deficit, fiscal deficit, FRBM et al are all very fine, surely as citizens, we
have a right to know how much capital is being deployed in nation-building activitiesand
how such capital is being raised.


 At a ridiculous level, but just to forcefully make the point, a perfectly balanced revenue
budget may have zero funds deployed for long-term investment in the country's
infrastructure. Something close to this may well have happened as is pointed out below.
 
 Third, a capital budget provides a full perspective. A lack of appreciation of the nation's
capital needs may have derailed us. An obsession with the revenue books has led India up
the path of minimum investment in the country's infrastructure with an abysmal figure of
close to 3.5 per cent of the GDP for about three decades. Debate and discussion on a
publicly declared capital budget may have averted this serious under-investment.


 Four, revenue and capital budgets are obviously inter-related just as a profit and loss
account and balance sheet are. Surpluses and allocations from the revenue budget go
towards capital investments. Similarly, the servicing of long-term capital features in the
revenue budget. In a jugalbandhi, there is no music when one half is missing, forgotten or
ignored.

 Five, a capital budget should be made understandable to the people. Just as the television-
viewing public has over the years gained an appreciation of the nuances of the revenue
budget (prices, inflation, deficits, taxes, allocations, subsidies and so on), the language of
capital budgets must also be made simple to the public at large who are today tuned in far
more to economic issues than ever before.

1.5 Criteria for capital budgeting decisions

Potentially, there is a wide array of criteria for selecting projects. Some share holders may want
the firm to select the projects that will show immediate surges in cash inflow, others may want to
emphasize long-term growth with little importance on short term performance viewed in this
way, it would be quite difficult to satisfy the differing interests of all the share holders.
Fortunately, there is a solution.

The goal of the firm is to maximize present shareholders value. This goal implies that projects
should be undertaken that result in a positive net present value, i.e., the present value of the
expected cash inflow less (-) the present value of the required capital expenditures. Using net
present values (NPV) as a measure, capital budgeting involves selecting those projects that
increases the value of the firm because they have positive NPV. The timing and growth rate of
the incoming cash flow is important only to the extent of its impact on NPV.

Using NPV as the criteria by which to select assumes efficient capital markets so that the firm
has access to whatever capital is needed to pursue the positive NPV projects. In situations where
this is not the case, there may be capital rationing and the capital budgeting process becomes
more complex.

Note that it is not the responsibility of the firm to decide whether to please particular group(s) of
shareholders who prefer longer or shorter term results. Once the firm has selected the projects to
maximize its net present value(NPV), it is up to the individual shareholder to use the capital
markets to borrow or lend in order to move the exact timing of their own cash inflows forward or
backward. This idea is crucial in the principle – agent relationship that exists between
shareholders and corporate managers. Even though each may have their own individual
preferences, the common goal is that of maximizing the present value of the corporation.

While net present value is the rule that always maximizes share holder value, some firms use
other criteria for their capital budgeting decisions, such as internal rate of return (IRR),
Discounting cash flow (DCF) and payback period etc.

1.6 NEED AND IMPORTANCE OF CAPITAL BUDGETING

Capital Budgeting means planning for capital assets. Capital Budgeting decisions are vital to any
organization as they include the decision to;

1. Whether or not funds should be invested in long term projects such as setting of an industry,
purchase of plant and machinery etc.,

2. Analyze the proposal for expansion or creating additional capacity.

3. To decide the replacement of permanent assets such as building and equipments.

4. To make financial analysis of various proposal regarding capital investments so as to choose

the best out of many alternative proposals.

The importance of capital Budgeting can be well understood from the fact that an unsound
investment decision may prove to be fatal to the very existence of the concern. The need,
significance or importance of capital budgeting arises mainly due to the following.

1. Large Investments

Capital budgeting decisions, generally involves large investment of funds. But the funds
available with the firm are always limited and the demand for funds exceeds the resources.
Hence it is very important for a firm to plan and control its capital expenditure.

2. Long-term commitment of Funds

Capital expenditure involves not only large amounts of funds but also funds for long-term or
more or less on permanent basis. The long-term commitment of funds increases the financial risk
involved in the investment decision.

3. Irreversible Nature
The capital expenditure decisions are of irreversible nature. Once the decisions for acquiring a
permanent asset is taken, it became very difficult to dispose of these assets without incurring
heavy losses.

4. Long-term Effect of profitability

The investment decisions taken today not only affects present profit but also the future
profitability of the business. A profitable project selection is fatal to the business.

5. Difficulties of investment decisions

The long term investment decisions are more difficult to take because,

1. Decision extends to a series of years beyond the current

accounting period

2. Uncertainties of future and

3. Higher degree of risk.

6. National Importance
An investment decision through taken by individual concerns is of national importance because
it determines employment, economic activities and economic growth.

7. Effect on cost structure

By taking a capital expenditure decision, a firm commits itself to a sizeable amount of fixed cost
in terms of interest, supervisors salary, insurance, building rent etc. If the investment turns out to
be unsuccessful in future or produces less than anticipated profits, the firm will have to bear the
burden of fixed cost.

8. Impact on firm’s competitive strength

The capital budgeting decisions affect the capacity and strength of a firm to face competition. It
is so because the capital investment decisions affect the future profits and costs of the firm. This
will ultimately affect the firms competitive strength.

9. Cost control

capital budgeting there is a regular comparison of budgeted and actual expenditures. Therefore
cost control is facilitated through capital budgeting.

10. Wealth Maximization

The basic objective of financial management is to maximize the wealth of the shareholders.
Capital budgeting helps to achieve this basic objective. Capital budgeting avoids over
investments and under investments in fixed assets. In this way capital budgeting protects the
interest of the shareholders and of the enterprise.

1.7 STEPS IN CAPITAL BUDGETING

Capital budgeting is a complex process. It involves decision relating to the investment of current
funds for the benefit to be achieved in future which is always uncertain. Capital budgeting is a
six step process. The following steps are involved in capital budgeting;

1. Project generation

The capital budgeting process begins with generation or identification of investment proposals.
This involves a continuous search for investment opportunities which are compatible with firm’s
objectives.

2. Project screening

Each proposal is then subject to a preliminary screening process in order to assess whether it is
technically feasible, resources required are available, and expected returns are adequate to
compensate for the risks involved.

3. Project evaluation

After screening of project ideas or investment proposals the next step is to evaluate the
profitability of each proposal. This involves two steps;

a. Estimation of cost and benefit in terms of cash flows

b. Selecting an appropriate criterion to judge the desirability of the
project.

4.Project selection

After evaluation the next step is the selection and the approval of the best proposal. In actual
practice all capital budgeting decision are made at multiple levels and are finally approved by top
management.

5. Project execution and implementation

After the selection of project funds are allocated for them and a capital budget is prepared. It is
the duties of the top management or capital budgeting committee to ensure that funds are spend
in accordance with allocation made in the capital budget.

6. Performance review

After the implementation of the project, its progress must be reviewed at periodical intervals.
The follow-up or review is made by comparing actual performance with the budget estimates.

Chapter 2