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Capital Budget

In for-profit businesses, the purpose of a capital budget is to determine a project’s value to shareholders. Since capital is considered the funding source for such ventures, a capital budget focuses on the return on investment to shareholders for the long term. However, since the public sector is not driven by profit, a capital budget, from a public finance viewpoint, should compare the long-term cost of any project with future revenue sources, and consideration should be given to the impact of that project on taxpayers. The rationale for a separate capital budget is related to the policy and procedural purposes of the government (or school system). That is, the capital budget focuses more on the specialization of the expenditure, specifically related to the acquisition of ...

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