---
title: Capital Budget
description: Capital budgeting or investment appraisal, as it is sometimes called, is budgeting for large investment projects.
---

[Realized 1031 Glossary of Terms ](https://www.realized1031.com/glossary)

# [Capital Budget](https://www.realized1031.com/glossary/capital-budget)

 Written by [The Realized Team](https://www.realized1031.com/glossary/author/the-realized-team) | Jun 27, 2022 12:00:00 PM

Capital budgeting or investment appraisal, as it is sometimes called, is budgeting for large investment projects. These projects include building a new plant, a new product, buying new machinery, or even another company. A capital expenditure (CAPEX) is not an expense. However, CAPEX can be depreciated over several years.

Investments in CAPEX generally take several years before they begin turning a profit. Analysts will determine at what point the investment is expected to generate a profit, and the minimum profit expected by the company, which is called a hurdle rate. When comparing two projects, the discounted cash flow method is used as part of the analysis. Comparing each project’s NPV and internal rate of return, analysts can make a determination about which project the company should decide on.

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