Recommendation

Since Bhutan Printing Solution is only relying on Payback period capital budgeting techniques.
We would like to suggest Bhutan Printing solution to go for liquidity constrained net present
value model (LCNPV) which is designed specifically for the unique requirements of small
businesses.
There are three theoretical requirements that should be met by capital budgeting methods;
1. It must first take into account each financial flow for the project.
2. In order to account for the time value of money, it must secondly discount the cash flows.
3. Finally, it must be able to choose the one project that will maximize the firm's value from
among projects that are mutually exclusive.
Therefore, the liquidity constrained net present value model is a suggested capital budgeting
technique that is both theoretically sound and considerate of the unique concerns of small
businesses (LCNPV).
The LCNPV decision rule states that any investment must be accepted if the debt-to-total cost
part of the cash flows for each month exceeds the investment's debt payments.
Advantages of LCNPV
 No further cash flow projections beyond those the company presently makes are
necessary.
 Regardless of whether the company is using the payback, NPV, or LCNPV capital
planning models, these cash flows would be used if the small business is unwilling to
foresee beyond a specified time horizon.
 Additional forecasts are not needed by the LCNPV model. (John B.White)
The tools and processes used to assess and choose an investment project are referred to as
capital budgeting procedures. It aids managers in choosing initiatives with the highest
revenues and acceptable risk. (Verbeeten, 2006)
Usage of Capital Budgeting has various benefit to the firm which is given as follows;
 A corporation can better comprehend the risks associated with investment opportunities
by using a capital budget. and how these risks affect the company's financial results
 It aids the business in determining which investment strategy would produce the highest
possible return
 A business can select a capital budgeting methodology or method to determine whether
it would be financially advantageous to take on a project or not
 All capital budgeting strategies/methods aim to boost shareholders' wealth and offer the
business a competitive edge.
 It helps the company to make long-term strategic investments.
 It enables a business in making sensible investment decisions in a market that is
competitive. (Borad, n.d.)
Significance of Capital Budgeting

 A decision regarding the capital budget will have long-term effects. The rate and nature
of the company's growth are impacted by it. Unlike the consequences of current
operational expenses, the effects of capital budgeting decisions must be endured over a
longer period of time.
 Making a capital budgeting decision necessitates a sizable capital expenditure.
Therefore, the business must properly plan its capital budgeting program in order to
obtain the money when needed and employ them in the most advantageous ways. A
wise investor can increase the company's wealth, while a poorly thought-out and poor
choice could endanger its profitable position and perhaps lead to its closure.
 Making judgments about the capital budget requires projecting future benefits, which is
practically definite. Because of the effect of economic, political, social, and technological
aspects, it is exceedingly challenging to estimate sales income, expenses, and benefits
precisely in quantitative terms. (Acharya Nagarjuna University)