HOW DO CFOS MAKE CAPITAL BUDGETING AND CAPITAL STRUCTURE DECISIONS? by John Graham and Campbell Harvey, Duke University* e recently conducted a comprehensive survey that analyzed the current practice of corporate finance, with particular focus on the areas of capital budgeting and capital structure. The survey results enabled us to identify aspects of corporate practice that are consistent with finance theory, as well as aspects that are hard to reconcile with what we teach in our business
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Capital Budgeting Ashford University Government Budgeting PPA603 June 16, 2014 Capital Budgeting The main principle of the capital budget is to channel the total distribution of state expenditures for public services. To present the greatest possible outline of current and planned capital investments and assure state governments’ ability to borrow will not increase nor decrease. This paper will discuss how the debt capacity of state is established and then discuss and assess the effect
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ELEMENTS OF MODERN FINANCE - MGCR-641 THE SUPER PROJECT Prepared By: Bogdan Enoiu Chris McLachlin J. Alejandro Noboa February 03, 2006 EXECUTIVE SUMMARY PROBLEMS 1. Is General Foods using the proper capital budgeting methods in evaluating their potential projects? 2. Should General Foods invest in the Super project? In evaluating the Super Project, what are the relevant cash flows to use? In particular: • Test market Expenses • Overhead Expenses • Erosion of Jell-O contribution margin
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Mortensen, the senior vice president of project finance for Midland Energy Resources, has been asked to calculate the weighted average cost of capital (WACC) for the company as a whole, as well as each of its three divisions as part of the annual budgeting process. Cost of Capital, WACC, CAPM Cost of capital is the rate of return that the firm must earn on investment so that the market value of the company’s equity share does not fall. The correct discount rate depends on the riskiness of
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initial outlay or outlays necessary to produce the future amount(s). 1-5. A capital investment is an outlay that is expected to result in benefits extending more than one year into the future. Capital budgeting is the process of selecting capital investments. 1-6. Steps in capital budgeting process: - Establish Goals - Develop Strategy - Search for Investment Opportunities - Evaluate Investment Opportunities - Select Investments - Implement
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appraisal issues viz. differing project life cycle, impact of inflation, analysis and allowance for risk. Therefore financial managers must consider these issues carefully when making capital budgeting decisions. Inflation is one of the important parameters that govern the financial issues on capital budgeting decisions. Managers evaluate the estimated future returns of competing investment alternatives. Some of the alternatives considered may involve more risk than others. For example, one alternative
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Bonds are a form of long term debt financing in which an organization issues a bond to raise capital. When a bond is issued the organization is in actuality taking a loan at an interest rate referred to as a coupon which it typically pays on an annual or semiannual basis. The bond then has a maturity date at which time the organization pays back the principal to whoever is holding the bond. For a health care organization who wishes to issue a bond they must typically go through a series of six
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whether the project should be accepted on the basis of standard capital budgeting techniques. • Explain three reasons why corporate risk is important even if a firm’s stockholders are well diversified. • Identify two reasons why stand-alone risk is important. • Demonstrate sensitivity and scenario analyses and explain Monte Carlo simulation. • Discuss the two methods used to incorporate risk into capital budgeting decisions. • List four different types of embedded real options, explain
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Papa Geo’s Restaurant Budget Proposal For [2014-2019] BUSN-278 [Term] Professor[name] DeVry University ------------------------------------------------- Table of Contents Section | Title | Subsection | Title | Page Number | 1.0 | Executive summary | | | | 2.0 | Sales Forecast | | | | | | 2.1 | Sales Forecast | | | | 2.2 | Methods and Assumptions | | 3.0 | Capital Expenditure Budget | | | | 4.0 | Investment Analysis | | | | | | 4.1 | Cash flows | | | | 4.2 | NPV
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Capital Recommendation Paper Alandra Shamblee ACC 543 June 13, 2011 Sean Damico Guillermo Furniture is a furniture manufacture located in Sonora, Mexico. Guillermo Furniture was thriving until the late 1990s, when the economy just took off. With new housing, competitors moved in with more technologically advanced equipment than Guillermo. Guillermo’s furniture created by hand; was one of a kind. The competitors that
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