This paper is concerned with a capital budgeting problem where both investment and borrowing decisions are considered in imperfect capital markets The capital budgeting problem allows for project indivisibility and lets the borrowing interest rate vary from period to period in close relation to the size of debt. Generally, a formulated model in mixed integer non-linear programming is difficult to solve since the solution space is not convex. However, characterizing the dominance properties of solutions enables the model to be solved by enumeration by virtue of special structures inherent in the model. An equivalent model is employed in order to develop the implicit enumeration algorithm which requires much less computation. Computational results for a set of example problems are also provided.