Critically discuss the purpose of capital budgeting and elaborate on the four steps to follow when...
Critically discuss the purpose of capital budgeting and elaborate on the four steps to follow when making a decision about a major purchase or project. (130 words)
Homework Answers
The Capital expenditure budget represents planned expenditure on fixed assets like land, building, plant and machinery etc. It is a process of evaluation huge investments in order to obtain best return on investment. Capital budget is prepared to cover long years to determine whether investment in capital asset is profitable or not over the period of years.
Steps to be followed while making decision about a major purchase or project:
1. Identify and evaluate potential opportunities - If the company is having multiple opportunities to invest, it has to explore all the options before making investment decision.
2. Estimate operating and implementation cost - The company should estimate and make research about hoe much cost will be required to finalise the project.
3. Estimate cash flow or benefit - Estimated future cash flow is essential before making investment decision. Various techniques like payback method, discounted cash flow method can be used for the same.
4. Assess risk - The company should estimate the cost involved in the project and the money which company will lose in case of failure of project.
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Critically discuss the purpose of capital budgeting and
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want like Han to elaborate clearly what are and are not important
elements to engage the capital budgeting decision for the LSUS
corporation.
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13. Conclusions about capital budgeting Before making capital budgeting decisions, finance professionals often generate, review, analyze,...
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(Four capital budgeting techniques are NPV,IRR,Payback and
ARR)
Discuss the strengths and weaknesses of the four most commonly used capital budgeting techniques. Which of the techniques is considered the best? Why?
8. Conclusions about capital budgeting The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm's strategic goals. Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that...
1) Amanda is not sure about the capital budgeting technique and
want like Han to elaborate clearly what are and are not important
elements to engage the capital budgeting decision for the LSUS
corporation.
Choice 2: Capital Budgeting Decision Since LSUS corporation is producing at full capacity, Amanda has decided to have Han examine the feasibility of a new manufacturing plant. This expansion would represent a major capital outlay for the company. A preliminary analysis of the project has been...
6. Conclusions about capital budgeting Aa Aa The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm's strategic goals. Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check...
8. Conclusions about capital budgeting The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm's strategic goals. Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that...
13. Conclusions about capital budgeting Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm's strategic goals. Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that apply. O Because...
9. Conclusions about capital budgeting Aa Aa E The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm's strategic goals. Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid?...
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