The capital budgeting investment decision has been a very typical issue in the sustenance of a company. Several companies have lost their identity or liquidated due to wrong capital budgeting decision they made at a particular point of time. Rwanda particularly sets up capital budgeting decision in order to manage its limited resources effectively and efficiently. However, it does not develop an enduring technological base that can support the growth of its economy and Rwanda’s capital budgeting on investment decision is not usually well articulated. For instance, Rwanda vision 2020 finds that the Rwanda companies do not derive high benefits from the budgeting and this leads to inefficient performance and loss. Based on these common problems in industries and the effect of globalization on industries, it is important to use effective method before making any investment decision. Capital budgeting is extremely important because the decision made directly affects the organization future growth. The traditional methods commonly used for capital investment appraisals by some Organizations is the Payback Method, Net present Value, Internal Rate of Return and discounted payback period. The wide acceptance of these methods has called for a discussion that why these Methods are still used in the organizations. The research was to examine the effect of Capital budgeting on investment decisions on the organizational performance. The method to use are the theories on the capital budgeting as it affects decision making in the organization and past research work methods which companies used in appraising investment, are used as Secondary Data in order to have a basic insight into the importance of the Capital budgeting on organizational performance .The theories helped us to look for the methods that are often used in the capital budgeting decision .The analysis was done on the basis of various research works that have been done on capital budgeting, and different data of the study of the research is being used as secondary data to obtain the result. Exploratory research was conducted and involved gathering qualitative data using questioners. The population size considered 70 employees working in finance and accounting units and senior manager. From the analysis, the trend show that the capital budgeting has been commonly used in improving the performance of various organizations. It is was clear that the research that the capital budgeting decision is often majorly used in the organizations all over the world despite its criticism by academicians, making inference from the analysis of companies as the expected results of this research.
Keywords: Capital budgeting, Payback Period
