Possible Questions TRUE-FALSE STATEMENTS 1. Capital budgeting decisions usually involve large investments and often have a significant impact on a company's future profitability. 2. The capital budgeting committee ultimately approves the capital expenditure budget for the year. 3. For purposes of capital budgeting, estimated cash inflows and outflows are preferred for inputs into the capital budgeting decision tools. 4. The cash payback technique is a
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CAPITAL BUDGETING DECISION 1. Meaning Capital budgeting denotes situation where funds are invested immediately and returns are expected after a year. In growing orgnisation capital budgeting is more or less continuous process and it is carried out by top management. The role of any Finance Manager is to critically evaluate proposal, evaluation of alternative proposal and select best one. The following are the some of the cases where heavy capital investment may be necessary. A) Replacement
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AN APPRAISAL OF CAPITAL BUDGETING TECHNIQUES (A CASE STUDY OF FORTHRIGHT SECURITIES AND INVESTMENT LIMITED, MARINA, LAGOS) BY OLOJOTUYI OLUFEMI O. FPA/AC/09/3-0101 BEING A PROJECT REPORT SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCY SCHOOL OF BUSINESS STUDIES, THE FEDERAL POLYTECHNIC, ADO EKITI EKITI STATE IN PARTIAL FULFILLMENT OF REQUIREMENTS FOR THE AWARD OF HIGHER NATIONAL DIPLOMA IN ACCOUNTANCY DECEMBER, 2011. CERTIFICATION This
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Capital Budgeting Analysis Amanda Kocanda, DeUndre’ Rushon, HuongTran,& Morgan Gibreal MBA 612, Financial Strategy October 28, 2014 Bellevue University Abstract Within this paper, an overview of the general capital budgeting process and how it is implemented within organizations is defined and reported. Key terms related to capital budgeting are also defined. Risk analysis based on the Net Present Value (NPV) is performed on the salvage values before and after sales tax values along
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Capital Budgeting: Capital budgeting is the process of determining whether or not an investment is worthwhile. Often companies will have several opportunities and must measure each one's potential in order to make a comparison and choose just one or a few. It is the process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime cash inflows and outflows are assessed in order
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Capital budgeting is a process that involves making of investment decision by company from one or a series of investment projects to identify the most worthwhile projects for undertaking. A company’s capital investment usually focuses:- • Expansion in existing market • Develop new products or entering new market • Purchase new building / plants • Replacement or improvement on existing equipment Capital budgeting decision is vital for any company because it always involved: • Large investment
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Analysis • Capital budgeting uses cash flows not accounting profits. • To calculate the value of a capital budgeting project, use incremental cash flows, not total cash flows. • Know what items are considered in cash flow analysis for capital budgeting: ▪ incremental cash flows, ▪ indirect effects, ▪ opportunity costs, ▪ changes in net working capital, ▪ shutdown cash flows,) ▪ beaware of overhead costs. Forget sunk costs. • Know when sunk costs are considered in capital budgeting
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Introduction Capital Budgeting is a process that allows businesses to assess whether their investment decisions like purchasing a new plant, constructing a new building, or engaging in a new venture is profitable enough to pursue. (Investopedia. 2015) When making crucial investment decisions, capital budgeting gives businesses a more informed way of deciding. This is because investment decisions are weighed in terms of the cash flows over the duration of the new venture or investment. This way, a
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approach to capital budgeting. 2. Define an “Incremental cash flow” as the term is used in capital budgeting 3. Define the payback period method in capital budgeting and state the payback period decision rule. 4. What is the payback period of the following project? Initial Investment: $60,000 Projected life: 7 years Net cash flows each year: $14,000 5. Define the discounted payback period method in capital budgeting and state the payback period decision rule
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Capital budgeting (or investment appraisal) is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures.[1] Many formal methods are used in capital budgeting, including the techniques such as Accounting rate of return Payback period Net present value Profitability index
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