29 Capital Budgeting Meaning The term Capital Budgeting refers to the long-term planning for proposed capital outlays or expenditure for the purpose of maximizing return on investments. The capital expenditure may be : (1) Cost of mechanization‚ automation and replacement. (2) Cost of acquisition of fixed assets. e.g.‚ land‚ building and machinery etc. (3) Investment on research and development. (4) Cost of development and expansion of existing and new projects. DEFINITION OF CAPITAL BUDGETING
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Capital Budgeting Techniques (Summary) | | Decision Rule | | | | |Method |Independent |Mutually Exclusive |Formula ffffffffffffffffffffffffffffffffffff |Advantagesffffffffff |Disadvantagesfffffffff | |Average Accounting Return|Accept the project if the|Choose the project
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Capital budgeting refers to the total process of generating‚ evaluating‚ selecting and following up on capital expenditure alternatives. The firm allocates or budgets financial resources to new investment proposals. Basically‚ the firm may be confronted with three types of capital budgeting decisions i) the accept/reject decision‚ ii) the mutually exclusively choice decision and iii) the capital rationing decision. i) Asset – reject decision: This is a fundamental decision in capital budgeting
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Capital Budgeting: Decision Criteria Brigham and Daves Ch. 12 Christopher B. Alt CFA PhD What Is Capital Budgeting? Analysis of potential additions to fixed assets Long-term decisions typically involving large $ expenditures Making the ‘right’ capital budgeting decisions is enormously important to a firm’s future Should we build this plant? All rights reserved - Christopher B. Alt 2 Key Steps in Capital Budgeting Estimate CFs (inflows & outflows) Assess riskiness of CFs Determine
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Capital Budgeting Case Theresa Cruz‚ Jesika Watson‚ Sophina Lane QRB/501 March 30‚ 2015 Melinda Gregg Capital Budgeting Case Analyzing the Results In the two capital budgeting cases corporations (A and B) have different revenues values and expenses as well as variable depreciation expenses‚ tax rates and discount rates. The members of our team had to compute both corporate cases NVP‚ IRR‚ PI‚ Payback Period‚ DPP‚ and project a 5-year income statement and cash flow in a Microsoft Excel spreadsheet
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INTRODUCTION TO CAPITAL BUDGETING Overview 159 7.1 The NPV Rule for Judging Investments and Projects 159 7.2 The IRR Rule for Judging Investments 161 7.3 NPV or IRR‚ Which to Use? 162 7.4 The “Yes–No” Criterion: When Do IRR and NPV Give the Same Answer? 163 7.5 Do NPV and IRR Produce the Same Project Rankings? 164 7.6 Capital Budgeting Principle: Ignore Sunk Costs and Consider Only Marginal Cash Flows 168 7.7 Capital Budgeting Principle: Don’t Forget the Effects of Taxes—Sally and Dave’s
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Virgin Active is one of the largest health club businesses in the world‚ with over 170 clubs and more than 900‚000 members spread across the UK‚ Italy‚ Spain‚ Portugal and South Africa. Virgin Active is currently developing sites across Australia. The Virgin Active club located at 138 Bourke St‚ Melbourne officially opened in May 2009. Virgin Active opened its first Australian club in French’s Forest‚ Sydney in December 2008. Virgin Active offers convenient class times as well as fast classes for
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Some Basic Active Learning Strategies Engaging students in individual or small group activities–pairs or trios especially–is a low-risk strategy that ensures the participation of all. The sampling of basic activities below can be adapted to almost any discussion or lecture setting. Using these strategies‚ or variations on them‚ ensures that you’ll hold your students’ attention in class and throughout the semester. Ice Breakers Background Knowledge Probe Two Column Method Think / Pair / Share One
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Capital Budgeting Case Su Guan Fin316 4:00 PM 11/13/2014 Directions: Answer questions 1 – 6 and turn in a hard copy of your answers at the beginning of class on Thursday November 13th. No late submissions will be accepted. You will need to use Excel or Google sheets for most of the analysis. Please type answers to the questions in this word document and attach each spreadsheet as exhibits at the back. I am trying to replicate an exam experience as much as possible so I will not be answering individual
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Week 5 Case Study Capital Budgeting Case Capital Budgeting Case This week‚ Learning Team C‚ has completed capital budgeting on Corporation A and Corporation B. We were given $250‚000.000 to acquire a corporation. We decided to choose Corporation B. To ensure that our decision was the best‚ this week‚ we defined‚ analyzed‚ and interpreted the Net Present Value and the Internal Rate of Return for both Corporations. We made the decision based on more financial sense. Below‚ we have outlined our
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