CAPITAL BUDGETING – INVESTMENT DECISIONS SUBMITTED BY : Abhisht Sinha (08305) Himangi Malik (08321) Swagata Ghoshal (08337) Tijeel Kumar Tarun (08352 I. CASE ABOUT BUILT OPERATE AND TRANSFER The case taken is about Built Operate and Transfer. It is a feasibility report which was prepared to present economic analysis carried out on the project and contain result of economic evaluation of the project so that the owner can take investment decision and the project can be properly planned and
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CHAPTER 6 COST BENEFITS AND ANALYSIS 6.1 Costing for the Current System 6.1.1 Cost of Labor Professional Rate 1 Payroll Manager 93.75/hr 750/day 15‚000/month 1HRD Assistant 81.25/hr 650/day 13‚000/month Total Php 23‚000/month 6.1.2 Supplies Price Total Supplies (Annual) Bond paper - Short Bond Paper 1500pcs. 1.00 each 1500.00 - Long Bond Paper 1500pcs. 2.00 each 3000.00 Stapler 6pcs. 125.00 each 750.00 Staple 50 boxes 20
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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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Questions Case #5 – Marriott Corporation: The Cost of Capital 1. Are the four components of Marriott’s financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of its cost of capital? Does this make sense? 3. What is the weighted average cost of capital for Marriott Corporation? a. What risk free rate and risk premium did you use to calculate the cost of equity? b. How did you measure Marriott’s cost of debt? 4. If Marriott used a single corporate
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1) Using pertinent information from the case text‚ prepare a capital budgeting analysis of the wind turbine project using the payback and net presentation value or internal rate of return models. Costs for Wind Turbine include: SEDs Fee - Grant ($157‚000 - 15‚000) $142000 Purchase and Installationn - Grant ($3‚900‚000 - $582‚000) $3‚318‚000 · Loan for $3‚300‚000 for 10 years and 7.3 interest rate $465‚935.76 per year (10 years) · Cash $18‚000 Insurance and Maintance Fee $75000 per year
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Management Accounting: Capital Budgeting and Qualitative Measures. “One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land‚ buildings‚ machinery and so on‚ in anticipation of being able to earn an income greater than the funds committed”. (Investment Appraisal sheet). A Capital Budgeting Process essentially defined as‚ “the process by which the financial manager decides whether to invest in specific capital projects or assets”
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budget is one of your best tools for reaching your goals – whatever your age or stage in life. It’s a plan of what money you expect to receive and how you expect to spend it. * Who should have a budget? * How to make a budget * Use the money planner * Things you need * Getting help * Tracking your spending * Making the most of your income Who should have a budget? Tip: A tight budget is harder to stick to. Be realistic. Everyone can benefit from a budget. It’s not just
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Factors that Affect the Time Value of Money Time value of money is the concept that an amount of money in one ’s possession is worth more than that same amount of money promised in the future (Garrison‚ 2006). The reason for this is that money today can be invested to earn interest and therefore will be worth more in the future (Brealey‚ Myers‚ & Marcus‚ 2004). This paper will explain how annuities affect time value of money (TVM) problems and investment outcomes. In addition‚ this paper will briefly
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Estimate the required net working capital for each year and the cash flow due to investments in net working capital. The firm needs to increase its net working capital by 12% of incremental sales revenues. This amount is needed in the year before the sales revenue is earned. The amount for year 0 is 12% x $250‚000 = $30‚000.00‚ and that for year 1‚ 2‚ and 3 are $30‚900.00‚ $31‚827.00‚ and $32‚781.81 respectively. The cash flow due to the changes in the working capital is shown in Table 2. Year 0 1 2
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Answers to Warm-Up Exercises E9-1. Answer: Weighted average cost of capital N 10‚ PV $20‚000 (1 0.02) $19‚600‚ PMT Solve for I 8.30% 0.08 $20‚000 $1‚600‚ FV $20‚000 E9-2. Cost of preferred stock Answer: The cost of preferred stock is the ratio of the preferred stock dividend to the firm’s net proceeds from the sale of the preferred stock. rp Dp Np rp (0.15 $35) ($35 $3) rp $5.25 $32 16.4% E9-3. Cost of common stock equity Answer: The cost of common stock equity can be found by dividing the dividend
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