TAILIEUCHUNG - Lecture Introduction to Accounting: An integrated approach: Chapter 12 - Penne Ainsworth, Dan Deines

Chapter 12 Planning investments: Capital budgeting. In this chapter, the learning objectives are: Explain the concept of and calculate a company cost of capital, use NPV analysis to make investment decisions for a not-for-profit entity, use NPV analysis to make investment decisions assuming uniform depreciation, use NPV analysis to make investment decisions assuming tax depreciation. | Chapter 12 Planning Investments: Capital Budgeting Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 12- What are the Steps in the Capital Budgeting Process? Identify the opportunity Requests, opportunities, expansion Select appropriate investments Net present value analysis (other methods are available) Determine how to finance the investments Chapters 13 and 14 Accept or reject the opportunity 12- What are the Steps in the Net Present Value Method of Capital Budgeting? Estimate the relevant cash inflows and cash outflows Determine the present value of the future cash flows using the company’s weighted average cost of capital Compute the net present value (NPV) Accept or reject the proposal If NPV is positive—accept (in general) If NPV is negative—reject (in general) 12- What are the Sources of Cash Inflows? Cash receipts from using the asset (net of tax) Decrease in working capital requirements Sale of old assets (net of tax) Sale of new assets at the end of the project (net of tax) Tax savings due to tax shield NOTE: SAVINGS = INFLOW 12- What are the Sources of Cash Outflows? Increase in working capital requirements Cash expenditures from using the asset (net of tax) What is included in the initial investment? Purchase price Costs incurred to receive the asset Costs incurred to get the asset ready for its intended use (set up) 12- 12- How is the Weighted Average Cost of Capital Determined? (% of company financed by debt * rate of interest on debt) + (% of company financed by owners’ equity * required rate of return on owners’ equity) 12- How is the NPV Determined? (Sum of the present value of cash inflows and outflows) less the cost of the initial investment 12- How do we Determine Net of Tax Amounts? Cash receipts and expenditures Cash flow * (1 – tax rate) Tax shield from depreciation Depreciation amount * tax rate Proceeds from sale of asset with gain Proceeds – (gain * tax rate) .

• Kế toán - Kiểm toán
• Introduction to Accounting
• Business operating activities
• Lecture Introduction to Accounting
• Capital resource process
• Planning investments
• Capital budgeting
• Accounting information systems
• Accounting events
• Financial accounting
• Lecture Financial accounting
• Accounting information
• Management accounting
• Accounting standards
• Accounting equation
• Lecture Introduction to financial accounting
• Financial statements
• Business activities
• Financing activities
• Investing activities
• Business processes
• Lecture Introduction to cost accounting
• Introduction to cost accounting
• Traditional method
• Activity based costing
• Managerial accounting issues
• Accounting method
• Cash basis method
• Accrual method
• Survey of accounting
• Lecture Survey of accounting
• Accounting for cash
• Accounting cycle
• Managerial accounting
• Product costing
• Financial resources
• Accounting provides information
• Lecture Accounting 1
• The Accounting equation
• Operating processes
• Conversion process
• Short term decision making
• Cost volume profit model
• Strategic planning
• Balanced scorecard
• Costs of budgeting
• Human resources
• Payment process
• Evaluating conversion process activities
• Customer support process
• Revenue process
• Time value of money
• Planning equity financing
• Financial risk