Response to SP 1-David Tucker
I concur with the fact that capital budgeting should be used by an organization when considering an investment. Capital budgeting plays a substantial role in planning investment projects in an organization in the long run. Besides, it is very significant in evaluating capital investment projects such as purchasing equipment and rebuilding of the material. Through capital budgeting, an organization can also reduce the production cost, which in turn can lead to increased revenue for the organization. However, capital budgeting only applies to organizations but not individuals. Individuals should, therefore, engage in the financial management of personal resources by budgeting, planning, saving, and keeping stock for the future. For instance, individuals can keep track of their finances by maintaining an excel sheet of their profits, gains, and losses. As a result, they can keep a tab on their income versus expenses and plan better.
Response to SP 2-Nicole Palabrica
I firmly agree with the fact that reduced interest rates encourage individuals and organizations to invest more due to lower borrowing costs. Lower interest rates make it cheaper to borrow, which encourages spending and investment. Capital budgeting techniques play a pivotal role in guiding people on evaluating the profitability of a project they are likely to venture in. For instance, individuals can purchase houses due to lower mortgage interest payments brought about by reduced interest rates. Householders are left with increased disposable income, which causes a rise in consumer spending. The internal rate of return also plays a significant role in guiding individuals and organizations in considering the time value of money when evaluating a project. For instance, an individual is likely to engage in a project that can yield profits within a short period compared to a long time.