Name : paki Akshaykurno Dattapwosd.

Roll NO DSJ0
Sub i: inorcial Monoqenent Dote

QLDeline Capitalisaboh 9 Eploin Hhe Causes Ghd eltecds o

Ovekcapilalsabion,
"CopiBalistion is the Surn oP Hhe pa Value o} slocks
and bonds outslondinq
Causes ooNeKapilalisaloh
Thee ave many acBoks hich acCOun he sitaio
o Oveh-Ca poial saioh. o a
Aont Causes. Company ollooihg Ore Some impok

Heavyplonotioh Gpehses Beocham is o the vielo that

"A Cevtoin deqsee of ovekCapiBahsazioh may be Caused by
heovy iSsue expehses" HeoNy plarokoh ond esloblish ment
expenses inCEQse the amouh o Cap1Bohsaioh kithout cddlin
o he ea hin¢s Capacity of he Conpohy.
siAcquihing Asseks ak an Thlaked puce i- Asels nay be acqed
at an ihtlated ohice o dukibg boun pekiod heh Ehe pices
of the asseks are ails peak Asoa Compahy moy
acquie
he asset (o a goinyCanceh by playing unduly hifhphite ol"
Hhe yehdo kqoodul

)Ponoioh/ fenoibh_ dnin Bootpaiod

n - ta CoinponyiS
oaled duing an inoionaypeiod, a ahy daelopment achvity
(epaisadion because it has to spehd huge amcuht
 Date :

iyloveseglimaioh of fuhue Eaun ingso.undueskmalion

o} Capilolisalioh Rake i Eaynin4s theoy o Cnpitalisalah
|equibes estmoioh to be cone as bedopds the tukue
eathings and the Copitolisotion Hate.tf Hhis esbimatith
phoper Chpichsa Loh.
y-ovek issue oP Capilol: Deecive nan Cia) planning lWillnay
leod to exCesSive Sue_of shases ot debehties. his
put a Conslont buwdenon theeasnings of the Company
as the CopiBo) Canho be paobly uilk sed and the dhdd,
inlevesk needsto be pmd oh the Capilol hal is. bih
Aoised

)Libesal Dividend pahcy ie A Cotnpohy alloolnga kberal

dhàdehd poley nay hok velain sulleieb fuhds o safe
|inohCihghig may aclva.sely afect the eanihgs o} dhe
Company in utuse kesulin in ovet- Capikalksolioh: t is
also_ obse-ved that bera) chividehd's are paic o the Cost
o! Snadequolepovisioh to depeca ioh.
wiLack_o Reseves - Lowe, amouh o seseAYes bouie
en kaul boolaihg ok bigh ales or futuLe equilem ents. sch
aapolcy. Jedluce s._Hhe ealpro} oF the Canpahy Ghd.
ledds to ce Capibolsaio..
 Date:

Bonowinat Highe InBevest Rales ove CapiBalisatioh.

may also aMiSe klheh the Company bo:xols Yuhds at exosbia:
n ote o! inleest I he toteof inteves (s mobe theh.
the tate o eanibgs,the kale o tesh on Shase may
An belclw_hormal.

Toxatioh gohty z Hiyh ales of lanalioh may leoyeJle ih.

Hhe handso the Company to povide b depueciakon , keplatemeh
ol assels and paying divident to the shaehaldes - this moy
advessely aeck iks eohing Capaciky ohd lecg to oveL
|Caplaisaion,.
Tadeduak Demahd b pioclucds it? a Companys pladucks
eiskL a lonslan decline,it LHL bing douh the proFidabi iky
o Hhe Comoahy this lail. kesulinlowes eBukh oh Capiba)
emplayedahd thaly a Sialion o! ovek- Capilaisahion
 Date:

Q01hol 1s unde Capilclisalion Explain the Casuse abd

elecds of undevcapilolisation..
An excess_o? bue agset Malues_OVe the_04gke
4ake o sBocks ohd bonds. ou sBahdln'
J| Unde esimotion o Cooito! QecvimehLs The promaies
|may uhde eslimole Hhe Capila)_hecdg_of the Compchy
H he eahings. plove fo be highe Lhen the Coh Cen Shall
beCone undes Copitalised.

i EHdebey ond Belte Donogemen ACohpony nay have

optimally ulised the asels ond ehhanced iHs clciehey
by exploiting -eYely poSSible oppouhity auailable in he
noke hee is a plopek Cortsol ore the expehchkue o}
Hhe Compony- As Such mahage meh o Such a CompahyiS
highly efteht Which wesulks in hyh ea}hihys
i) ovek- estimaiah ol apilalisaBioh ale o Under- esimadion
Hegukes esinatoh to be done as kejasds the We
eakhlys ahd the Capilalisalioh kode t! his esbmolioh ploCe
Lss IS bulty or biased, theh it boill hoB sesut papr Capekali.
scLiohAs_Such ovek eshimaioh of Copitalisaton tale OA
under esimaioh o utue eothings sosuls in uhder
Capitalisakioh.
 Date

Aonoion Duing Dapyessioh ACompany foabed dusin!

Capital:sed
la ohase o} dephession kEIN And itsel uhde-
duind the bootn peliod hen plices hise the book Value LhM be
he lwer igue o oxgihol 0ice Jess depiecialonthe eanins
laL Such Bime may ineage opostanately hghe heh an
ncvease in Hhe amoun o Capikal mployed.
Cinsevakive Dividehd polcy i If he mahogenen follouas a
CohSeabye diudehd polkcy ie. diseibuing Jes dlividehd and
reloinihg moe Yo sel Anancing, ik elies Jess oh oltside
puhds lhich ae Cosly
yScessive Depeciaioh I aCompony bliaS CQ0licy o} Choy
in excesSiYe dep-eciatioh, j tesults in loweL book lalue o
he asses theh the heal Value
Vi) dihd all Gains i Some Conpahies Conihueto opeLOle SLCCess
Auily cluing the phose o depiessioh. they may Ands Hhat
thei. earnihgs ave uuolly high hen they ehtes theboon
peuiod.

v Desie Carbal and TEadingoh. Equty Someimes due to

Be Cangeiwobve_appiocch of He pomokes, thay scise lasseL
amouh af Capila). in gh_eftorts no to dilue HheCohtol
 Date :

G3lhak is Copita Budgeing 9 bploin in delai!" Dsoyhdel

Cash. iouw. method / Tinne Adlusted melhods" hd e CapitoL
BudyelinCapilal
g. Audebing is JhepoceSsofdelesmi binf
ahelhe a. long term ihveslmehOL DoJecE is larthbile.
|this inlolves. assessing the pokenla p»okobility a the
vestmeht abd CompaLihg i to aiBesnolive uses a
CapiBal.
DisCouhled Cash polw methodls, alsoknoleA as
Tine adiusle methods, ne populaL techniques Secd in.
Capilal Bucgeing hey Consdes the bme Value o} nongy
hich meansthat dolla veCeived

Distounte Cash olo mehod.

DNet puesh Vollye CP) NPy Calcu laBes the pieseht
Malué of qll_ futuse Cosh inlous ond out tlous of a
paject and subitachs the inital inYeskmehtÊthepy
is posiive, the piajeckis Cohsidecd fnancially MiGble.
Intenal lale o Return IRR is the cscoluh ade
hat makes HheNPYo a ploleck Zeso.Ih keplsends
Ihe ate oP KkAh hakch inyestmeh is expecled to
gehelole oyeL its elime If the IRRSgea kee then.
he leguived kok of sekush (Costo Capibol), Ee. pkaleck
is Considere nghcollyvicble.
 Date:

l o00 tablty Index i PI is the vaio oP the pieseht

olue of utve Cash lows to the initial investm eht I
indiCotes the Value eated pes dolla o? ihvestmeh. A
D iS qhoke than ohe means the pojeckis Hnancialy
Viable

Payback pesiod i payback peuiod Calu lades Ehe tne i

Tara poect to \ecoVes iAs jnilial investntht. Shorte pay
kaks.
back peuiod. ae genesolly prelened, as they ihdi Cates Resle
Hetuvnse

Each melhod has its stiehdths ahd Heaknesses

ANPY iS gene%olly peened as it Consides .a Cush îeus
and piouides a diiecl mensune of valye. rRR IS use lu foe
Coppoing praiecds With chPeen Cash rous. but Can lead
t0 mutiple IRRs in Conplex plaiecds. Pr is useal os anking
galeChs, butitCon baised tosavds Stnalle poeCBs payback
peiod is eosy to Unde sBahd but daes hot Consid e Lhe bine
a value o! mohey.
 Date

@,|hite Shot hote oh.

o) Net peseht Valye Tie hel peseh Volie is e
dieehce beloen Hhe tolal preseht Value o praleckel
Cash in}'ouS avisihs_ton. a_ploposal and the inikial
hvestmeh nade in the plopo Sa<_ f Compuing Ehe net
present Value, he falouihg sleps ave lokeh
peash inlou Ohiaing ouk of a Gapilal budeking pioposa!
ave praieched for the ehe he tine of opasal.
) AtaBe of distount aA LJhich the Cash inlowS ae o
be cs touhted shoud be red the. ale of discoluhh depehds
oh the Cost oP funds Hequiteg o Ehe ploposG) ahd the
inloioh kaLe in the eo hormy
si). peseb Value o poecked) Cash inlo is lon pukec hy
applying the ate of d;sCouht Salecded.
)_Net pLeSeh value is Coimpubed by dlelucth g the
mitrG investmeh amcuh (eash outlo) rom he lsta
peser Valle of He Cosh ihlou t? he nel pies th&
value is psi Eive, the plopaSa| may_be acepkel and
mttelly. erclsve plopasals., a pkapnsal 4N24 higher hek
pieseht Valye kil! be Selechedl
 Date

Aocbilhty Ihdex -This is also tesmed_as Cost beheßt

atio ahd Is Computec) _by clircing the toBal pesth Volae
Cash inoos by the initia) investnent the potability
index indicoles Ahe +eush availoble pes upee inves ked in
a ploposal and is te uselu Hheh dlecisioh making_is to be
made om mutually exclusive popasals innoaihg die eht
anoun o! inyestmeht
poikabildy Ihder is de!ned as the lale of
Deseht lue of the Aue cash behels at te seguised
ade of sen to the hiial Cosh_ oul? bw of the investment.
this is_yeB ahcther method o eraluohing khe nvestment
0opoSalsIalso khdJh as the Rene?rt Cost atio
Jhe DI approach mgaSuYs preseh Value c
kelrns pel kypee ihvested his iS Simila to NPN gpp»oach.
hese piaiect shth olifereht initial inyestments ae to be
evaluaBecl., the I method poyes t be Hhe besk techhigue.