Capital Budgeting: the process of planning for purchases of long term assets ° example Suppose our firm must decide whether to purchase a new plastic molding machine for S125.000. How do we decide? Will the machine be profitable? Will our firm earn a high rate of return on the investmentCapital Budgeting: the process of planning for purchases of long￾term assets. • example: Suppose our firm must decide whether to purchase a new plastic molding machine for $125,000. How do we decide? • Will the machine be profitable? • Will our firm earn a high rate of return on the investment?