Decision Type in Financial Management:

Financial management involves making various decisions to ensure the efficient use of financial resources. The decision to establish a new unit involving machinery worth Rs. 10 lakhs falls under the category of Capital Budgeting Decision.

Capital Budgeting Decision:

- Definition: Capital budgeting is the process of making investment decisions in long-term assets such as machinery, equipment, buildings, etc.
- Importance: This decision is crucial as it involves committing a significant amount of financial resources for a long period.
- Objective: The main objective of capital budgeting is to maximize the value of the firm by investing in projects that yield positive returns.
- Factors Considered: Various factors such as the initial cost of the machinery, expected cash flows, risk involved, time value of money, and strategic fit with the company's goals are taken into consideration.
- Methods: Different methods like Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, and Profitability Index are used to evaluate the potential investment.
- Risk Analysis: Risks associated with the investment, such as technological obsolescence, market demand, competition, and regulatory changes, are assessed to make an informed decision.
- Decision Making: The final decision is based on a thorough analysis of all relevant factors and comparison of different investment options to select the most viable project.

In conclusion, the decision to establish a new unit involving machinery worth Rs. 10 lakhs requires careful evaluation and analysis through the capital budgeting process to ensure the optimal utilization of financial resources and the long-term success of the company.

Fixed capital requirement