L3 capital budgeting

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1、NPVandCapitalBudgeting(con’t)BoSunWHATISCAPITALBUDGETING?Whatcapitalbudgetingdoes?Howisthisimportant?•Makeuplong-termassetCapital--Assetsusedinproportionofthebalancesheet,productionofgoodsorwhichultimatelydeterminestheservicesfuturegrowthofthecorporation.Budget--Aplanfo

2、r•Theprinciplesofcapitalbudgetinginvestmentofcapitalhavebeenadaptedformanyothercorporatedecisions,suchasleasingandM&A.CapitalBudgeting--Theprocessofanalyzing•Manysecurityanalysisandvariousprojectsandportfoliomanagementarebaseddecidinguponwhichoncapitalbudgetingmethods.o

3、nestoincludeinthecapitalbudget.WHATISCAPITALBUDGETING?Typicalsteps?Projectscategories1.Generatingideas•Replacementprojects2.Analyzingindividual•Expansionprojectsproposals3.Planningthecapital•Mewproductsandservicesbudget•Regulatory,safety,and4.Monitoringandpost-environme

4、ntalprojectsauditingPROJECTSINTERACTIONSMutuallyexclusivevs.ProjectsequencingindependentprojectMutuallyExclusiveProjects:InvestinginonecreatestheonlyONEofseveralpotentialoptiontoinvestinanotherprojectscanbechosen.–RANKallalternativesandselectthebestone.Unlimitedfundsvs.

5、IndependentProjects:acceptingCapitalrationingorrejectingoneprojectdoesnotRaisecapitalforallprofitableaffectthedecisionoftheotherprojectsprojects.–MustexceedaMINIMUMHasafixedamountoffundsacceptancecriteria.REALEXAMPLESOFCAPITALBUDGETINGPROJECTSRioDisney:Wewillconsiderwh

6、etherDisneyshouldinvestinitsfirstthemeparksinSouthAmerica.Theseparks,whilesimilartothosethatDisneyhasinotherpartsoftheworld,willrequireustoconsidertheeffectsofcountryriskandcurrencyissuesinprojectanalysis.NewPaperPlantforAracruz:Aracruz,asapaperandpulpcompany,isexamini

7、ngwhethertoinvestinanewpaperplantinBrazil.AnOnlineStoreforBookscape:Bookscapeisevaluatingwhetheritshouldcreateanonlinestoretosellbooks.Whileitisanextensionoftheirbasisbusiness,itwillrequiredifferentinvestments(andpotentiallyexposethemtodifferenttypesofrisk).Acquisitio

8、nofSentientbyTataChemicals:SentientisaUSfirmthatmanufactureschemicalsforthefoodprocessingbusiness.Thiscross-bo