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BENEFITS OF DOCUMENT

  1. Provides of Steps in Capital Budgeting
  2. Provide of Methods are Payback, discounted payback, NPV, IRR, MIRR, Profitability Index
  3. Provides of Unequal lives and Economic life

DOCUMENT DESCRIPTION

Capital Budgeting : Evaluating Cash Flows

Lecture Outline
1. Steps in Capital Budgeting
2. Payback, discounted payback
3. Rationale for the NPV Method
4. Rationale for the IRR Method
5. Why use MIRR versus IRR?
6. Profitability Index
7. Unequal lives
8. Economic life

Ideally, businesses would pursue any and all projects and opportunities that enhance shareholder value and profit. However, because the amount of capital or money any business has available for new projects is limited, management uses capital budgeting techniques to determine which projects will yield the best return over an applicable period.

Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected.

As part of capital budgeting, a company might assess a prospective project's lifetime cash inflows and outflows to determine whether the potential returns that would be generated meet a sufficient target benchmark. The capital budgeting process is also known as investment appraisal.

Capital budgeting's main goal is to identify projects that produce cash flows that exceed the cost of the project for a firm.

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Source: Capital Budgeting - Evaluating Cash Flows PowerPoint document

 

Capital Budgeting - Evaluating Cash Flows

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File Type: PowerPoint (ppt)

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Number of Slides: 58 (includes cover, transition slides)

Related Topic(s): Cash Flow Management

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Initial upload date (first version): Mar 31, 2022
Most recent version published: Mar 31, 2022

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