IMPORTANCE OF THE PAYBACK METHOD IN CAPITAL BUDGETING DECISION. By Alaba Femi, AWOMEWE & Oludele Olawale, OGUNDELE Supervisor: Anders Hederstierna Thesis for the Master’s degree in Business Administration Fall/Spring 2008 THE IMPORTANCE OF THE PAYBACK METHOD IN CAPITAL BUDGETING DECISION. By Alaba Femi, AWOMEWE & Oludele Olawale, OGUNDELE A thesis submitted in partial fulfillment of the requirements for the degree of MBA (Master of Business Administration) Blekinge Institute
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Store Scenario Guillermo Furniture Store is a large furniture manufacturer that is located in Sonora, Mexico. Labor was considerably inexpensive and the location had ample supply of timber for furniture the company produced. In the early 1990s, business for the company started to decline caused by outside influences. The decline began when a new foreign competitor entered the market. The new competitor used technologically advanced methods that produced customized furniture at a lower price. Another
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is a daunting task, but when utilizing the tools of capital budgeting, the process of this type of business decision making can be quite useful. This paper will define capital budgeting and discuss some of the components of this decision making tool. It will also discuss some of the concerns that go along with Capital Budgeting. The Basics of Capital Budgeting What is Capital Budgeting? Organizations looking to expand their business through asset acquisition create a capital budget (Paden, n
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choices presented to Guillermo each have their advantages and disadvantages. This paper will explain the different business strategies and the projected outcomes of each strategy. Without proper analysis, Guillermo could make a business decision that does not suit the company’s operational goals and objectives. Guillermo can determine the best course of action through capital budgeting techniques. Through calculating the net present value (NPV), the internal rate of return (IRR), and the weighted
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Capital budgeting Making decisions having significant future benefits or costs for various entities and their stakeholders. Capital budgeting is the backbone of financial economics. Related topics in financial economics include: the time value of money, the meaning of net-present value, accounting concepts consistent with present-value calculations, discount rates, and option valuation techniques. In the public sector, the term is often exclusively associated with infrastructure investments
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The capital budgeting process is the process of identifying and evaluating capital projects, that is, projects where the cash flow to the firm will be received over a period longer than a year. Any corporate decisions with an impact on future earnings can be examined using this framework. Decisions about whether to buy a new machine, expand business in another geographic area, move the corporate headquarters to Cleveland, or replace a delivery truck, to name a few, can be examined using a capital budgeting
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capital budgeting technique in evaluating their potential projects especially in large R&D projects. The company mainly uses IRR. It uses sophisticated methods to project future cash flows. The company also uses scenario analysis to incorporate risk and for some very complex projects, it uses simulation analysis with the help of parent company in UK. However, Reckitt Benckiser Bangladesh Ltd is a well established company and it does not take large projects very often. Those capital budgeting techniques
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The misapplication of capital investment appraisal techniques Colin Drury Professor, University of Huddersfield, Huddersfield, UK Mike Tayles Lecturer, University of Bradford, Bradford, UK Surveys of capital budgeting practices in the UK and USA reveal a trend towards the increased use of more sophisticated investment appraisals requiring the application of discounted cash flow (DCF) techniques. Several writers, however, have claimed that companies are underinvesting because they misapply or misinterpret
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geting1.0 INTRODUCTION Capital budgeting plays an important role in a firm’s financial management, the selection of a project is of great importance because it required a very large capital expenditure which will have a significant impact on the financial performance of the firm. Therefore a mistake in capital budgeting process by a firm will cost them a long period of time. Capital budgeting can be defined or seen as a designed process which involves management of available resources to select
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1 HOTEL OWNER / OPERATOR STRUCTURES: IMPLICATIONS FOR CAPITAL BUDGETING PROCESS Chris GUILDING Service Industry Research Centre, and School of Accounting and Finance Griffith University – Gold Coast Campus Queensland AUSTRALIA C.Guilding@griffith.edu.au Tel: (07) 5552 8790 Fax: (07) 5552 8068 I am grateful for funding support for this study provided by the Australian Cooperative Research Centre for Sustainable Tourism. I would also like to acknowledge the helpful comments
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