Capital Budgeting Decision Analysis


On September 20, 2016, Saurabh Sharma, Senior Vice President of Bhatia Textiles Company, sat in his office pondering the new capital budgeting proposal for setting up a product line of branded shirts. As per standard company practice, he was required to evaluate the capital budgeting project using the traditional Net Present Value (NPV) approach and the Internal Rate of Return (IRR) criterion and present his findings to the management committee meeting scheduled for the next week. Saurabh wondered whether this new proposal would turn out to be a good investment for his company, which was looking to deploy funds in NPV positive projects. The case puts students in a financial analyst role wherein they conduct capital budgeting analysis using the popular techniques of NPV and IRR.

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