Capital Budgeting Formula

Capital Budgeting plays a vital role in allocating resources for major capital, or investment, expenditures. Given here is a capital budgeting formula for estimating the capital budget of an organization using the bottom-up investment approach that uses net income value and the depreciation for the budget calculation. A bottom-up approach formula is a detailed budget with spending plans by the department. Capital Budgeting Bottom-Up Approach Formula also helps to reduce capital expenditure.

Capital Budgeting Bottom-Up Approach Formula


c = n + d


c = Capital Budgeting
d = Depreciation
n = Net Income

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A bottom-up investing approach focuses on the analysis of individual stocks. Therefore, the investor focuses attention on a specific company rather than on the industry in which that company operates, or on the economy as a whole. Capital budgeting formula is essential for operating expense plan, less the depreciation expense.

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