Managerial Economics in Coca Cola
THEORATICAL REVIEW:
Project manger is expected to select the the project which is benificiary to the organization. Cost benefit anlysis is done by the project manger. It is highly unlikely that project manger select the the project whose cost exceeds its benefits.
Benefits can be measured either finacial or non-finacial. The puposuse of idetifying the financial benefits is called copital budgeting, which may be defined as decision making process by which organization evaluate the projects that include the purchase of major fixed assets such as machinary , building, and equipments. So there are two main catagories of selection of project, 1-Financial model
2-Non- financila model
FINANCIAL METHODS:
In financial maethod we determine the capital budget of the project. In capital budgeting following techniques are used,
1-Pay back period 2-Net present value
3-Internal rate of return 4-Profitability index
These method are explained below,
1-PAY BACK PERIOD: Payback period is the exect length of time needed to recover the intial investment of the firm as calculated from the cash inflows.
Payback period method is the least prices of all capital budgting methods because calculation is done in rupees and not adjusted from the time value of money. For examle the following table shows th cash flow streams of the project A. Initial investment | Expected cash inflow | | year 1 | year 2 | year3 | year4 | year5 | 10,000 | 1000 | 2000 | 2000 | 5000 | 2000 |
Upper table shows that the project A will continue to execly five years. And the payback period will exectly the four years. If the cash inflow in 4th year were 6000 intead of 5000, then the payback period would be three year and 10 months.
Accepance Criterion:
If the payback period calculated is less than some maximum acceptable period, the proposal is accepted, and if not, it will be rejected. If the required payback period is 4 year
Project manger is expected to select the the project which is benificiary to the organization. Cost benefit anlysis is done by the project manger. It is highly unlikely that project manger select the the project whose cost exceeds its benefits.
Benefits can be measured either finacial or non-finacial. The puposuse of idetifying the financial benefits is called copital budgeting, which may be defined as decision making process by which organization evaluate the projects that include the purchase of major fixed assets such as machinary , building, and equipments. So there are two main catagories of selection of project, 1-Financial model
2-Non- financila model
FINANCIAL METHODS:
In financial maethod we determine the capital budget of the project. In capital budgeting following techniques are used,
1-Pay back period 2-Net present value
3-Internal rate of return 4-Profitability index
These method are explained below,
1-PAY BACK PERIOD: Payback period is the exect length of time needed to recover the intial investment of the firm as calculated from the cash inflows.
Payback period method is the least prices of all capital budgting methods because calculation is done in rupees and not adjusted from the time value of money. For examle the following table shows th cash flow streams of the project A. Initial investment | Expected cash inflow | | year 1 | year 2 | year3 | year4 | year5 | 10,000 | 1000 | 2000 | 2000 | 5000 | 2000 |
Upper table shows that the project A will continue to execly five years. And the payback period will exectly the four years. If the cash inflow in 4th year were 6000 intead of 5000, then the payback period would be three year and 10 months.
Accepance Criterion:
If the payback period calculated is less than some maximum acceptable period, the proposal is accepted, and if not, it will be rejected. If the required payback period is 4 year