Framework for Developing a Capital Budgeting Business Case PPT

This PPT slide, part of the 47-slide Value-based Pricing Strategy PowerPoint presentation, outlines a structured approach to developing a capital budgeting business case, specifically focusing on the phase titled "Find the Value Ceiling." It emphasizes 3 key steps: creating an economic model, determining the bottom-line impact, and developing a business case. The central tool highlighted is a Benefits Matrix, which serves to capture both financial and non-financial benefits associated with a business case.

The Benefits Matrix categorizes benefits into 5 distinct areas: Revenue Enhancement, Cost Reduction, Cost Avoidance, Capital Reduction, and Capital Avoidance. This categorization aids in identifying the various components that can be quantified in a capital budgeting financial model. The matrix is divided into 2 main sections—financial and non-financial—further classified by whether the benefits are quantifiable or non-quantifiable.

For financial benefits, the matrix specifies 2 scenarios: one where the financial impact is clearly identifiable and measurable, and another where a financial impact exists, but cannot be accurately estimated. Non-financial benefits are also addressed, noting that while they may not have a direct financial metric, they still possess measurable impacts. This dual focus on both financial and non-financial aspects is crucial for a comprehensive evaluation of potential investments.

The slide effectively communicates the importance of a structured approach in capital budgeting, ensuring that all potential benefits are considered. This methodology not only aids in decision-making, but also enhances the overall robustness of the business case being developed.

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Pricing Strategy Cost Reduction Capital Budgeting Capital Budgeting Business Case Business Case