Capital budgeting is a key element of corporate finance, where tools such as Net Present Value (NPV), Internal Rate of Return (IRR), and the Payback Period model are used to make long-term investment decisions. While these decisions are well-structured in organizational contexts, households and individuals also make important financial decisions, but often without structured evaluation. This can result in inefficient use of savings, higher risk, and missed opportunities for wealth creation. This research proposes a conceptual framework, called Capital Budgeting for Personal Investment Decisions (CaPID), that uses capital budgeting principles in household financial decision-making. CaPID is built on the concepts of Time Value of Money and Capital Budgeting Decision Rules, guiding individuals through a three-stage process that includes identifying financial requirements, screening investment options, and conducting quantitative evaluations using tools such as NPV, IRR, Payback Period, and Profitability Index. To demonstrate the practical applicability and relevance of the framework, six standard household investment options comprising Fixed Deposits, Mutual Funds, Gold, Public Provident Fund, Real Estate, and ULIPs were evaluated. The results show how structured evaluation can enhance transparency and align investments with individual financial requirements. The study helps bridge the gap between corporate finance theory and personal finance practice, offering both theoretical insight and practical guidance to households, financial advisors, and policymakers. CaPID establishes a systematic approach to rational and informed personal investment planning by transforming abstract financial choices into measurable decisions.
Sultana Javeriya (Tue,) studied this question.