IndexMaximum return on investmentFactors affecting the capital budgetDividend policyWhen we talk about investments, we also talk about money spent, in order to determine the best possible result, it is extremely important that the organization select the right project in which to invest capital. Capital Budgeting is intended to help determine the most effective investment decisions for the company, as the ultimate goal is to maximize shareholder wealth by acquiring assets. According to Capital Investments (n.d.), “The company should decide which of the capital investments offered would provide the greatest value to its business and can then make the capital investment decision.” Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original EssayThe Maximum Return on InvestmentThe highest rate of return will not necessarily be the most effective rate of return, nor the best option for an organization simply because more money is made. More money can lead to a number of other factors and in some situations actually become more problematic for the company (e.g. taxes or risks). According to Updegrave (2017), of CNNMoney, states: “The higher the return an investment claims to offer, the riskier it will be, even if that risk is not immediately apparent.” A higher return on investment only means higher potential risks, simply because a company can earn more from one project over another does not mean it is the most viable or financially appropriate decision for the company to make. Factors That Play into Capital BudgetingThe capital budget tells financial managers how well a company is doing economically. Understanding capital budgeting provides a clearer understanding of the financial health of the business and provides financial managers with the tools to understand and present the financial health of a business. Capital budgeting concerns investment decisions made over a period of time and is useful for estimating future benefits arising from investment proposals. This information can be used in various ways to make sound business decisions. Capital budgeting provides a variety of data throughout its process, such as the formulation of long-term strategic objectives, estimates and forecasts of future cash flows. Factors contributing to these results may include the company's capital structure or its tax policy. Other areas can help the capital budgeting process, such as the availability of funds and the economic value of the project. Additionally, companies must also consider non-quantitative factors when undergoing capital rationing. For example, the company's culture, environmental concerns and/or the products/services offered may influence the company's decisions to undergo a specific investment project. Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom EssayDividend PolicyA portion of the company's profits earned from investment projects are returned to the shareholders who contributed to the investment project, these are known as dividends. According to Byrd, Hickman & McPherson (2013), dividends are defined as “payments made to shareholders by companies”. Some of the benefits of paying dividends are that they attract investors and make them happy, this could play a huge role in the return of such stakeholders for future investment projects. These stakeholders are essentially..